From real estate and digital art to government bonds, tokenizing real-world assets is no longer a thing of the future.
While critics wrote off much of the initial hype surrounding the tokenized real-world asset (RWA) market, the sector has been on a tear over the past year or so.Variety of asset categories are actively being tokenized and garnering investments.
WHY THE SUDDEN SPIKE IN INTEREST?
From the outside looking in, the tokenization of RWAs seems to be gaining momentum due to improved regulatory clarity in specific jurisdictions (such as Switzerland) and successful pilot projects.
De Vries said the unsustainable yields in decentralized finance (DeFi), which led to the collapse of many major crypto projects in 2022, have prompted investors to seek sustainable, real yields — such as the ones available with tokenized RWAs.
Real estate is one area in which tokenization has had a significant impact. As things stand, it is the largest asset class in the world, with an estimated $613 trillion value in 2023
BEYOND PROPERTY INVESTMENTS
While real estate has undoubtedly been a popular use case for tokenization, de Vries believes this space could face numerous challenges moving forward — primarily due to differing laws and registries across different jurisdictions. In his view, tokenization translates more seamlessly within asset classes like exclusive collectibles, diamonds, luxury watches, classic cars, securities and even carbon credits.
Moreover, tokenization’s influence can also be actively felt within the realm of traditional finance, especially in relation to popular instruments such as bonds, stocks and exchange-traded funds (ETFs).
IN CONCLUSION: Tokenization, akin to stablecoins, embodies five fundamental constituents: a blockchain, a reference asset, a valuation methodology, storage or custodianship, and redemption procedures.
Therefore, as more and more individuals, major market entities and investors continue to understand the immense technological and financial advantages possessed by tokenized RWAs, it will be interesting to see how this yet nascent market evolves and grows.
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