Many current conditions are favorable for tokenization. First, Trump plans to formulate a more favorable regulatory system for cryptocurrency; secondly, BlackRock, the world's largest asset management company, launched a tokenized money market fund this year, which has prompted other institutions to follow suit. Currently, many financial technology giants have begun to deploy tokenized businesses.
Will tokenization be the next revolution in finance, or is it just a passing fad?
Recently, the price of Bitcoin has reached a new high, rekindling people's hope that blockchain technology will revolutionize the financial system. Asset tokenization (Tokenization, which refers to digitizing real-world assets such as stocks and bonds through blockchain technology and expressing them as tradable tokens) has become one of the hottest topics on Wall Street and the cryptocurrency circle this year.
Analysts say that many current conditions are favorable for tokenization.
First, Trump plans to develop a more favorable regulatory regime for cryptocurrencies; second, BlackRock, the world’s largest asset manager, launched a tokenized money market fund this year, prompting other institutions to follow suit.
At present, many financial technology giants have begun to deploy tokenized businesses:
Visa launched a platform in October that allows banks to issue fiat currency tokens;
Stablecoin issuer Tether launched a tokenization platform in November;
Mastercard announced that it will connect its token network with JPMorgan Chase’s Kinexys blockchain platform for cross-border B2B transaction settlement. JPMorgan Chase said the Kinexys platform currently supports about $2 billion in transactions every day.
Raj Dhamodharan, Executive Vice President of Blockchain and Digital Assets at Mastercard, said:
"This is a clear trend that will continue to evolve and unlock many new business models."
Proponents of tokenization argue that the technology can increase asset liquidity, allow more investors to participate, and reduce costs and transaction times. Broadridge chief digital officer RobKrugman even said:
"It's probably more impactful than the internet, it's fundamentally rethinking how markets work."
However, this enthusiasm is also reminiscent of the overhyped blockchain technology a few years ago, when it was believed that blockchain could be used in everything from tracking lettuce at Walmart to digitizing stocks, but it turned out to be premature.
According to statistics from the data tracking platform rwa.xyz, there are currently only about 67,500 entities (mainly institutions) holding tokenized assets that are not stable coins. Research organization Opimas pointed out that only 0.003% of the total global asset value is tokenized, and many companies related to projects are on the verge of bankruptcy.
Analysts said the previously unfavorable regulatory environment was one of the main reasons. For years, U.S. regulators have encouraged banks to shy away from cryptocurrencies and related risks, and although tokenized securities run on the blockchain and are subject to the same rules as traditional securities, regulators have often classified them alongside cryptocurrencies as subject to heightened scrutiny.
At present, Trump's support for cryptocurrency has undoubtedly injected a strong stimulant into tokenization, which has also triggered concerns among some economists: This craze may lead to the tokenization of assets that should not be tokenized, exposing investors to new risks, such as hacker attacks. Investors may unknowingly pay more for tokenized products than traditional products, or end up holding assets that are difficult to sell. OndoFinance CEO Nathan Allman warned:
“You end up with a lot of mispriced assets being sold to less sophisticated investors.”
What is indisputable, however, is that despite the controversy surrounding tokenization technology, it does have the potential to improve certain financial processes, as Capco managing director Ervinas Janavicius said:
"There's a lot of opportunity, we're not denying that, but there's still a lot of work to be done."