A report from Northern Trust and HSBC this year estimated that 5% to 10% of all assets will be digital by 2030.
As cryptocurrency prices fluctuate ahead of their next change in direction, the tokenization market - the issuance of blockchain-based digital tokens representing assets from bonds to stocks and real estate - may finally reach mass criticism.
Large financial firms such as London Stock Exchange Group, WisdomTree, and Mirae Asset Securities have invested in token-based trading and investment platforms in the past year, or are in talks to develop them. Others like Franklin Templeton, UBS Asset Management, and ABN Amro have launched tokenized versions of assets such as money market funds and green bonds.
More than one-third of institutional investors in the United States and nearly two-thirds of high-net-worth investors plan to invest in tokenized assets this year or next, according to two surveys of more than 300 participants conducted by EY-Parthenon in the month of May.
What’s attracting the big investment players are the potential savings opportunities, according to Colin Butler, Head of Institutional Capital at blockchain firm Polygon Labs.
Tokenization offers the traditional financial sector more transparent trading, greater liquidity, as well as reduced costs and settlement times, by automating processes via smart contracts - blockchain-based agreements that settle automatically.
On the other hand, critics point to major gaps in trading infrastructure, a lack of cohesive global regulation, and still limited feedback among investors. Indeed, the actual issuance and value of traditional tokenized assets remain modest.
The market capitalization of tokenized securities is $345 million, according to data from Dune Analytics, a small fraction of the broader $1 trillion cryptocurrency market. These tokens have seen 2.3% growth over the past month, much less than Bitcoin’s roughly 10% rise over the same period.
However, some see a brighter future: a report from Northern Trust and HSBC this year estimated that 5% to 10% of all assets will be digital by 2030.
While the idea of tokenization has been around almost as long as Bitcoin, the nascent market hasn’t lived up to much of the initial enthusiasm. Some market players are now seeing significant progress.
Obstacles remain, with market players also pointing to, among other things, the need for larger trading pools. However, some are optimistic.
“In the future people are hoping for a better network effect where more and more companies adopt the same platforms so that assets become more tradable,” said Doug Schwenk, CEO of Digital Asset Research.
Original article published on Money.it Italy 2023-10-15 07:00:00. Original title: Tokenizzazione degli asset: a che punto siamo?
