NYDIG (Digital Investment Group) stated that tokenization of real-world assets (RWAs), such as stocks, will not yield huge benefits for the cryptocurrency market immediately, but these benefits could increase significantly if these assets are allowed to better integrate into blockchains.
Initial benefits versus future benefits:
* Initial light benefits: Greg Cipolaro, global head of research at NYDIG, stated that the benefits to networks hosting these assets, such as Ethereum, will be "light at first." These initial benefits will include transaction fees collected on the use of tokenized assets, and the host blockchains will enjoy "increasing network effects" from storing these assets.
* Growth through democracy and inclusion: Cipolaro emphasized that these benefits "increase as accessibility and interoperability rise."
* Future vision (Decentralized Finance - DeFi): In the future, these tokenized assets could become part of decentralized finance (DeFi) to be used as collateral for borrowing, or as a lending asset, or for trading. However, he pointed out that this "will take time as technology evolves, infrastructure is built, and rules and regulations develop."
Regulatory environment and transformation:
* Predictions from the U.S. Securities and Exchange Commission (SEC): Paul Atkins, former SEC chairman, indicated that the U.S. financial system could adopt tokenization "within two years," which Cipolaro considers evidence that "tokenization is likely to be a major trend."
* Need for regulatory evolution: Regulations must evolve to better allow the integration of tokenized assets with decentralized finance, or else their immediate impact will not be significant.
Challenges and differences in tokenization:
* Significant differences in tokenized assets: Cipolaro noted that making tokenized assets interoperable and composable is not straightforward, as "the form and function of these assets vary greatly," and they are hosted on both public and private (non-public) networks.
* Traditional finance structures required: Even on an open network like Ethereum, designing tokenized assets (which are often securities) requires structures from traditional finance, such as: brokerage and trading companies, Know Your Customer (KYC), investor accreditation, approved wallets (whitelisted wallets), transfer agents, and others.
Current state of networks (size of tokenized assets):
* Canton Network (private): It is currently the largest network for tokenized assets valued at $380 billion, representing 91% of the total "represented value" of all real tokenized assets.
* Ethereum Network (public): It is "by far" the most popular public network for tokenized assets, with $12.1 billion of real tokenized assets deployed on it.
Advantages of blockchain technology:
Despite the ongoing need for traditional financial structures, companies are using blockchain technology to achieve significant benefits including:
* Semi-instant settlement.
* 24/7 operations.
* Programmed ownership.
* Transparency and auditability.
* Efficiency of collateral.
Summary and recommendation for investors:
Cipolaro concluded that "in the future, if things become more open and regulations become more accommodating, as Chairman Atkins suggests, access to these assets is expected to become more democratic, and thus these tokenized assets will enjoy wider access." He urged investors to "be attentive, even if the economic impacts on traditional cryptocurrencies are currently minimal."
