A Bloomberg report has mentioned that Wall Street firms are signaling interest in Real-world asset (RWA) tokenization. The report, which was released on October 16, discussed the reason for the interest and the opportunities that lie there.
According to the Bloomberg report, the firms are also leaning towards Blockchain, the underlying framework for tokenization. The report revealed that blockchain helps RWA become more flexible, cheaper, and easy to exchange. It also noted that most of these firms are also using blockchain for their earnings, with most of them through customer transaction fees.
RWA tokenization deals with the conversion of financial instruments like bonds, stocks, and art into digital assets. After the conversion, it can be sent into a wallet and moved anywhere. It also allows more than one person to own a tokenized item. A good example is the tokenization of Andy Warhol’s artwork, with different parties owning portions of the artwork which costs millions.
Wall Street was initially against blockchain and digital assets with most of them calling it a passing fad. However, companies on Wall Street are now opening up to crypto with some of them listing several digital assets.
RWA tokenization industry predicted to reach $2 trillion by 2030
The report also revealed that McKinsey research had predicted that the RWA tokenization industry could hit as high as $2 trillion by 2030. The research did not include digital assets like Bitcoin and stablecoins. It noted that the growth could be driven by the need to use bonds, mutual funds, and other financial instruments.
Another research noted that the market could blow up and reach about $16 trillion by 2030. The research drew the conclusion based on the current use of assets which could drive the need for RWA tokenization.
Artificial intelligence (AI) could also be another push for the RWA tokenization industry. The research used the recent partnership between SingularityDAO and Cogito Finance to infuse RWA into their AI-backed v2 DynaVaults.
However, these predictions still rely on the regulatory framework that will be used in the future. Although things are still uncertain in the US, countries like Singapore are making clear regulations regarding RWA tokenization.
BlackRock takes center stage in tokenization push
According to the report, BlackRock is one of the Wall Street companies showing firm interest in RWA tokenization. Earlier this year, the firm announced plans to tokenize about $10 trillion of the assets under its management.
BlackRock also submitted a filing to the United States SEC to provide its clients with the BlackRock USD Institutional Digital Liquidity Fund.
The company’s CEO Larry Fink opined in 2022 that tokenization will be the future of the financial market. He noted that tokenization will offer a cheap and instant method of settlement. The company’s move to tokenize $10 trillion is in line with its CEO’s vision of the future of securities.
The first move of the firm will be to put a proper structure in place to enable the issuance and trading of tokenized assets. BlackRock also hopes to ink partnerships with firms to aid its private equity fund. The firm intends to start holding pilot tests and educate investors on how to use tokenized assets.