Crypto investors hail blockchain as market heats up

Crypto investors hail blockchain as market heats up

It's a bit old hat, says a cohort of crypto investors who are betting on blockchain technology breathing new life into traditional assets.

Achieving a critical mass in the market for 'tokenization', which issuing blockchain-based digital tokens that represent assets such as bonds, stocks, and real estate, may finally be reaching a critical mass.

Over the past few years, London Stock Exchange Group, WisdomTree and Mirae Asset Securities have either invested or are in talks to develop token trading and investment platforms. Franklin Templeton, UBS Asset Management and ABN Amro have launched tokenized assets like money market funds and green bonds.

More than a third of institutional investors in the US and almost two-thirds of high-net-worth investors plan to invest in tokenized assets this year or next, according to two surveys of more than 300 players in total conducted by EY-Parthenon in May.

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It's potential for savings on transaction costs that have big investment players circling, according to Colin Butler, global head of institutional capital at blockchain firm Polygon Labs.

It's a knife fight right now for market share and profits, so these cost-reduction ideas are very powerful, he said, adding that institutions had spent years studying tokenization and were now more comfortable launching projects.

By automating processes through smart contracts, blockchain-based covenants, backers say tokenization offers traditional finance more transparency, increased liquidity, plus reduced costs and settlement times.

In contrast to critics, critics point to widespread trading infrastructure inefficiencies, a lack of effective worldwide regulation and limited traction with investors. The value and issuance of tokenized traditional assets remains relatively small at this point in time.

Dune Analytics data indicates that the market cap of tokenized public securities is $345 million, a sliver of the 1 trillion wider cryptocurrency market. Over the last 30 days, those tokens have experienced 2.3 percent growth, lagging Bitcoin's rise of about 10 percent over the same period.

Some see a bigger future, though: a joint report by Northern Trust and HSBC earlier this year estimated that 5 percent to 10 percent of all assets would be digital by 2030.

Although the idea of tokenization has been around for nearly as long as bitcoin, the booming market hasn't come to fruition yet. Some market players are making substantial strides in their areas of activity.

re seeing senior level buy-in from large firms, said Morgan Krupetsky, head of institutions & capital markets at Ava Labs.

The fear of bigger trading pools remains, with market participants also pointing to the need for larger trading pools. Some are optimistic.