Real World Asset Tokenization a Promising Niche in Crypto Market

According to research, the tokenization of real-world assets (RWA) will be one of the major growth areas in 2023.

In its latest report on Jan. 4, analytics firm CoinMetrics highlighted growth areas for the crypto industry in 2023. It cited the tokenization of real-world assets as one of those growth sectors.

The process involves representing physical and traditional financial assets as digital tokens on a blockchain. The tokens can then be bought, sold, and traded just like securities.

Furthermore, this allows for a more secure and efficient investment environment for those that do not or cannot hold the physical assets.

Real World Assets into 2023

The crypto bear market has seen a decline in the tokenization of real-world assets in the latter half of 2022. Nevertheless, CoinMetrics still sees this as a growth area going forward.

“Despite this decline, RWA tokenization remains a promising area of growth in the crypto market.”

It cited an example of a number of banks recently piloting a program to tokenize various projects to reduce transaction settlement times. Furthermore, JPMorgan, Deutsche Bank, and SBI traded tokenized currencies and sovereign bonds in November 2022. They used the Ethereum layer 2 scaling network Polygon for the experiment.

“This demonstrates the increasing adoption of RWA tokenization by major financial institutions, and their adoption of L2 for scaling,” the report noted.

DeFi pioneer MakerDAO is also delving deeper into real-world assets. Maker’s ‘Endgame Plan‘ proposes making DAI a free-floating asset, initially collateralized by real-world assets. Additionally, the DeFi stablecoin protocol recently allocated funds into $400 million in short-term treasuries and $100 million investment-grade corporate bonds.

There has also been an increase in RWA-backed loans. This indicates the “growing demand for RWA tokens as a means of financing real world assets,” said CoinMetrics.

More Demand For Tokenized Assets

Archblock and Adapt3r announced a strategic partnership to onboard new institutional partners in December. The pair starts with U.S. banks using on-chain financing of real-world assets.  

According to the Financial Times, nonfungible token creators have been diversifying into RWA to generate new revenues amid an NFT market slump.  

Additionally, financial services company WisdomTree has launched a digital fund that tracks the Treasury Bond Index. CoinMetrics concluded:

“Overall, the adoption of RWA tokenization is increasing in the crypto market, with major financial institutions and platforms exploring the use of these tokens in various transactions.”