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President-elect Donald Trump’s pledge to bring more pro-crypto regulation to the federal government and BlackRock’s impending release of a new tokenized money-market fund have reignited interest in the prospect of tokenization, according to Bloomberg.
Tokenization refers to putting real-world assets and data on the blockchain, representing ownership of those assets. Additionally, tokenization, with built-in smart contracts, automates trust in transactions by enabling money and assets to be held in digital escrow on the blockchain. These assets are only available for access when the buyer completes their payment and the seller fulfills the delivery of the product.
While the Biden administration’s skepticism toward the digital asset industry pumped the brakes on tokenization, Wall Street players are increasingly revisiting the idea. “Now they felt like they are able to do something and sped up their timeline a lot, whereas previously they were just watching,” Charlie You, RWA.xyz co-founder, told Bloomberg. “They are making things happen.”
The idea of tokenizing real-world assets (RWA) has been a recurrent topic in crypto discussions, often described as a fundamental step toward financial transformation. Now, analysts say, this long-anticipated shift is finally on the cusp of materializing.
“These advancements are now on the horizon, supported by the regulatory shifts anticipated in the U.S.,” said Anthony Rousseau, Head of Brokerage Solutions at TradeStation. “The tokenization of real-world assets is set to transform financial infrastructure by enhancing new efficiencies, liquidity, and investment opportunities."
“As these frameworks and innovations take shape, bitcoin’s role as a leading hard asset and hedge against monetary debasement will be solidified, marking the beginning of a transformative era for the financial ecosystem,” Rousseau added.
Critics, however, highlight the complex legal landscape, including the fact that tokenizing assets can convert them into securities. This subjects them to different regulations, increasing costs and in some cases choking innovation. Others underline the centralization risks and smart contract bugs linked to tokenization protocols, which could lead to potential losses for investors.
But most are undeterred. “By tokenizing those assets, it enables natural efficiency,” Rob Krugman, chief digital officer at Broadridge, told Bloomberg. “It may even be bigger than the internet. It’s fundamentally rethinking the way the markets work.”