As Wall Street pulls ahead of crypto-native players in the field of tokenizing real-world assets, mainstream institutions face the question of whether to push on into the gray area of decentralized finance.
This gray zone, also known as DeFi for short, comprises projects that use automated software atop blockchains to deliver various financial services. Such ecosystems are typically outside the control of any one party, shrouded in regulatory ambiguity and open to a potentially wide pool of participants.
At issue is whether Wall Street’s digital-asset pioneers should intersect with these riskier crypto environments. The alternative approach for big institutions is to build blockchain-based representations of assets like bonds on gated digital ledgers, or carefully steer the use of tokenized products on public ones.
For some banks, full scale decentralization in tokenization “is not going to be realistic or desirable,” said Steven Hu, head of digital assets, trade and working capital at Standard Chartered Plc. “There’s a critical need for centralized authority to ensure to the authenticity, the uniqueness and the proper use of the underlying asset.”
Standard Chartered expects a tokenization market of about $30 trillion by 2034, with trade finance contributing a 16% share. At present, the market value of cryptocurrencies stands at $2.4 trillion. So far, about $13.2 billion of real world assets are tokenized. Private credit is the largest segment, accounting for $8.4 billion, ahead of US Treasuries in second, according to rwa.xyz.
BlackRock, Franklin
At the vanguard in the Treasuries segment are BlackRock Inc. and Franklin Templeton, which operate government securities funds whose ownership is recorded on blockchains. The funds have garnered nearly $1 billion in assets — represented by the BUIDL and BENJI tokens — since launching in March 2024 and April 2021, respectively. That’s more than half of the total $1.8 billion in tokenized Treasuries, rwa.xyz data show.
Crypto-native players see restricted, private blockchains as unlikely to scale. Larger ecosystems will develop on public blockchains, said Nana Murugesan, president at Matter Labs Inc., a company that seeks to improve the usability of Ethereum, the most important commercial highway in digital assets.
Source:- yahoo.finance
