an emerging reality in an inevitable future

The crypto industry has been booming, with discussions about the future of trading financial assets, as well as the possibility of putting them on chain. Some of the major players in the financial world, such as BlackRock, are beginning to notice the transformative power of blockchain-based technology.

This begs the question of what will be next. And in this conversation, real world assets (RWAs) have definitely emerged as a frontier, capturing the spotlight with their potential.

RWA: a rapidly evolving landscape

Undoubtedly, the tokenization of real-world assets is reshaping the field of traditional finance, merging tangible assets with blockchain technology. This intersection has already created an expanding ecosystem where traditional assets are repurposed and put on the blockchain as digital tokens.

The growth of this subsection is evident, demonstrating the increased adoption of asset tokenization as well as its potential to reimagine financial markets.

Some experts predict that the tokenization of illiquid assets could unlock a market worth up to $4 trillion by 2030, an ambitious projection that highlights the scale of the opportunity as well as the capability of blockchain to solve inefficiencies in the world of traditional finance.

What is behind the growth of RWAs?

There are several factors fueling the rapid expansion of the real world asset market and are setting the stage for a paradigm shift in the way financial assets are traded and even managed.

These include, but are not limited to:

Improved liquidity

In essence, tokenization aims to turn assets that might traditionally be illiquid into tokens that are very easy to trade. This is capable of increasing liquidity, which could play a transformative role for certain specific areas such as real estate, private equity and art, all fields that have historically required long holding periods, while also being subject to barriers to relatively high input.

Fractional ownership

One of the most interesting aspects of RWAs is the ability to break down high-value assets into smaller, more tradable units. This opens up opportunities for a wider range of investors, democratizing access to assets such as commercial property or rare commodities.

Transparency and Security

The immutability offered by blockchain technology offers unparalleled transparency, which also means that transactions will be tamper-proof. This reduces the risk of fraud, but also builds confidence in the market.

Cost effectiveness

One of the long-standing promises of blockchain is to eliminate middlemen, thereby reducing transactional friction and improving cost efficiency.

What are some real-world applications of RWAs?

And while the above may sound appealing, it’s also important to delve into some of the practical applications of RWAs, which demonstrate their transformative potential.

real estate

Investors can now buy digital shares of physical properties, significantly lowering the investment threshold. This innovation makes real estate, a traditionally high-barrier asset, more accessible to individual investors.

Merchandise

Commodity-backed tokens have emerged as a strong use case, with the market capitalization of these tokens reaching $1.1 billion. Gold has proven to be the most popular asset for tokenization, offering a stable and universally recognized store of value.

Treasury products

Tokenized treasury products have experienced phenomenal growth, increasing by 782% in 2023 alone. Valued at more than $931 million, these products highlight the growing appetite for blockchain-based financial instruments in the institutional and retail markets.

While the above statistics are impressive, they are also representative of only a fraction of the impact that RWAs could have on the global financial world.

The integration of real-world assets into blockchain technology signals a shift in how we perceive and interact with the broader financial system. Companies like BlackRock, the world’s largest asset manager, are already starting to explore the possibilities, meaning that the era of tokenized assets is no longer just a distant vision but an emerging reality.

Author: Ivo Grigorov, CEO of Credefi Finance

Ivo is an experienced finance specialist with a proven track record of working in the banking sector. He was extensively involved in the development and design of various financial instruments in both the debt and equity segments. His skill set includes experience in market and credit risk, capital adequacy and management. As a strong banking and finance professional with a Master of Science (MSc) focused on Global Banking and Finance from the European Business School (EBS) – London, he has a proven track record in successfully implementing financial products. Ivo has been in the blockchain and crypto market since early 2016 and a firm believer in its future applications.

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