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The Development of Tokenization: From Hype to Portfolio Management Strategy
The era when tokenization was simply a buzzword has passed. The compliance approach and institutional engagement become the key factors defining the challenges and opportunities of tokenization for an advisor.
Current State of Tokenization
* Existing products: BlackRock, Franklin Templeton, and Fidelity launched on-chain Treasury funds and private credit strategies
* Assets: Bonds, private credit, money market funds available on-chain and settled instantly
* Main challenge: Not issuing tokens. Managing identity, transfers, sanctions, and lifecycle
Architecture of Compliance Is Important
Compliance can be embedded into:
* The token itself: High precision, but it is difficult to change the contract to account for sanctions
* Environment separately: Flexibility but additional middle-man risk in case of assets being moved outside
* Network: More simplified tokens, but restricted usage across different chains
This will determine cross-chain usability, compatibility with decentralized finance solutions such as Aave or Morpho, as well as the ability to serve as collateral.
Institutional Infrastructure is On-Chain
* DeFi Lending: $840M+ tokenized deposits of real-world assets
* New Platforms, Old Plays: Tokenize assets, use as collateral, borrow, and reinvest. Cheaper and faster than TradFi
* Macro-Aware: Exposure to tokenized Treasurys declined while tokenized gold surged several times due to interest rate changes. Productive collateral
Credit Risk Becomes Transparent
DeFi risk models like Credora provide constant, on-chain evaluations. Advisors need to inquire about how assets perform under pressure, beyond their meaning. Grades from A+ to D facilitate tailored portfolios.
Open Questions
* Corporate events remain largely off-chain
* Illiquid assets such as private debt and real estate are not yet fully supported by DeFi
* Adoption will be uneven until infrastructure issues are addressed
#Tokenization #RWAs #CryptoForAdvisors
The era when tokenization was simply a buzzword has passed. The compliance approach and institutional engagement become the key factors defining the challenges and opportunities of tokenization for an advisor.
Current State of Tokenization
* Existing products: BlackRock, Franklin Templeton, and Fidelity launched on-chain Treasury funds and private credit strategies
* Assets: Bonds, private credit, money market funds available on-chain and settled instantly
* Main challenge: Not issuing tokens. Managing identity, transfers, sanctions, and lifecycle
Architecture of Compliance Is Important
Compliance can be embedded into:
* The token itself: High precision, but it is difficult to change the contract to account for sanctions
* Environment separately: Flexibility but additional middle-man risk in case of assets being moved outside
* Network: More simplified tokens, but restricted usage across different chains
This will determine cross-chain usability, compatibility with decentralized finance solutions such as Aave or Morpho, as well as the ability to serve as collateral.
Institutional Infrastructure is On-Chain
* DeFi Lending: $840M+ tokenized deposits of real-world assets
* New Platforms, Old Plays: Tokenize assets, use as collateral, borrow, and reinvest. Cheaper and faster than TradFi
* Macro-Aware: Exposure to tokenized Treasurys declined while tokenized gold surged several times due to interest rate changes. Productive collateral
Credit Risk Becomes Transparent
DeFi risk models like Credora provide constant, on-chain evaluations. Advisors need to inquire about how assets perform under pressure, beyond their meaning. Grades from A+ to D facilitate tailored portfolios.
Open Questions
* Corporate events remain largely off-chain
* Illiquid assets such as private debt and real estate are not yet fully supported by DeFi
* Adoption will be uneven until infrastructure issues are addressed
#Tokenization #RWAs #CryptoForAdvisors
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