Asset tokenization, the process of creating digital representations of real assets on a blockchain, has emerged as a key trend in both traditional and crypto finance. As companies like BlackRock ( NYSE:BLK ) , Visa ( NYSE:V ) , and Mastercard ( NYSE:MA ) adopt tokenization strategies, the technology promises to change the way assets are traded, managed, and used. Despite some challenges, asset tokenization will redefine the financial landscape by increasing liquidity, reducing costs and improving efficiency.
What is Asset Tokenization?
Asset tokenization involves converting physical or intangible assets—such as real estate, bonds, or art—into digital tokens stored on a blockchain. These tokens can represent ownership, simplify transactions and make traditionally illiquid assets more accessible to investors.
While the thought of tokenization has been around for years, its application has been limited. According to data tracker rwa.xyz, only 0.003% of the world’s assets have been tokenized. However, momentum is building as regulations improve, and major institutions explore the technology’s potential.
Institutional Adoption: A Game Changer
In 2024, BlackRock launched a tokenized money market fund, signaling institutional confidence in the technology. Visa introduced a platform that allows banks to issue fiat-based tokens, and Mastercard partnered with JPMorgan Chase (NYSE:JPM) to settle cross-border transactions on Kinexy’s blockchain platform. Kinexys processes $2 billion in daily transactions, demonstrating blockchain’s capacity to handle large-scale financial transactions.
These features create the conditions for a wider adoption. The Boston Consulting Group predicts tokenized assets under management could exceed $600 billion by 2030, a huge jump from the current $2 billion.
“Tokenization creates efficiency and opens up new markets,” said Raj Dhamodharan, Mastercard’s vice president of blockchain and digital assets.
Benefits of Asset Tokenization
Asset tokenization offers many advantages:
Liquidity: By splitting assets into smaller, tradable tokens, investors gain access to markets traditionally reserved for high-net-worth individuals or institutions.
Reduced costs: Blockchain reduces intermediaries, lowers transaction fees and operational costs.
Speed: Transactions are resolved faster, especially for cross-border deals.
Programmability: Smart contracts can automate processes such as deposit or dividend payments, reducing counterparty risk.
Rob Krugman, Chief Digital Officer at Broadridge, emphasizes the transformative potential of tokenization: “It may even be bigger than the Internet. It’s fundamentally about rethinking how markets work.”
Risks and concerns
Despite its promise, asset tokenization carries risks. Poorly structured tokenization projects can lead to overpricing, exploitation of investors or exposure to security breaches.
Nathan Allman, CEO of Ondo Finance, warns: “Outside of government bonds, there is little value in tokenized public securities. Many projects deploy low-quality assets.”
Additionally, tokenization may not be suitable for all asset types. Carlos Domingo, CEO of Securitize, questions its application to real estate, while Noelle Acheson, author of Crypto Is Macro Now, sees tokenized private equity as “a solution looking for a problem.”
Regulatory changes pave the way
A supportive regulatory environment is critical to the growth of tokenization. The US under President-elect Donald Trump is expected to take a more favorable stance and encourage innovation in blockchain-based financial products.
For example, the Commodity Futures Trading Commission (CFTC) is exploring guidelines for using tokenized assets as collateral, further legitimizing their role in mainstream finance.
Charlie You, co-founder of rwa.xyz, notes: “Regulatory clarity accelerates timelines. Now companies are making things happen.”
Future prospects
As tokenization gains traction, the financial industry is poised for a transformative shift. While challenges remain, the combination of institutional adoption, regulatory clarity and technological advancements signal a bright future.
Asset tokenization is not just a buzzword; it is a movement that is reshaping the way investors interact with markets. Whether it’s tokenized treasuries, real estate, or art, the ability to fractionalize ownership and improve efficiency opens up new opportunities in finance.
Featured image: Freepik
