Cryptoverse: ‘It’s a knife fight’ as traders get tokenized. Bitcoin? A group of crypto investors counting on blockchain technology revitalizing conventional assets calls it old hat. As crypto prices swing before their next swerve, “tokenization”—issuing blockchain-based digital tokens that reflect bonds, equities, and real estate—may be nearing a tipping point.
Over the past year, London Stock Exchange Group (LSEG.L), WisdomTree, and Mirae Asset Securities have invested in or are developing token trading and investment platforms. Franklin Templeton, UBS Asset Management, and ABN Amro (ABNd.AS) have tokenized money market funds and green bonds.
More than a third of U.S. institutional investors and over two-thirds of high-net-worth investors want to participate in tokenized assets this year or next, according to two May EY-Parthenon polls of over 300 players.
Colin Butler, global head of institutional capital at Polygon Labs, says major investment firms are interested in transaction cost savings.
He stated, “It’s a knife fight right now for market share and profits, so these cost-reduction ideas are very powerful,” adding that institutions had spent years researching tokenization and were ready to start programs.
Supporters argue tokenization automates procedures with smart contracts, blockchain-based covenants that settle automatically, making traditional finance more transparent, liquid, and cost-effective.
Critics say trading infrastructure is lacking, global regulation is inconsistent, and investors are still hesitant. The supply and value of tokenized conventional assets are low.
NETWORK EFFECT
Dune Analytics research shows a $345 million market valuation for tokenized public securities, a small part of the $1 trillion cryptocurrency industry. Over the past 30 days, those tokens have grown 2.3%, trailing Bitcoin’s 10% gain.
A joint analysis by Northern Trust and HSBC earlier this year predicted that 5% to 10% of assets will be digital by 2030.
Tokenization is nearly as old as Bitcoin, but the market hasn’t met the expectations. Some market players see major progress.
“I do think this time is different, largely because now you’re seeing senior level buy-in from large firms,” said Ava Labs’ head of institutions & capital markets, Morgan Krupetsky.
Despite market players’ calls for wider trading pools, challenges continue. Still, some remain optimistic.
“People want a better network effect where more firms adopt the same platforms to make assets more tradeable,” said Digital Asset Research CEO Doug Schwenk.
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