Real world asset (RWA) tokenization has been gaining traction among institutions, with financial giants like BlackRock stepping into the arena with their own tokenized assets. By harnessing blockchain technology, traditional assets can be issued, managed, and distributed more efficiently compared to their off-chain counterparts, particularly private and alternative assets. Security Token Market has been actively tracking this space since 2018 and has observed several emerging themes and their performance from monitoring over 600 tokenized products.
One prime example that has garnered attention is the BlackRock USD Institutional Digital Liquidity Fund ($BUIDL), a tokenized money market fund. In June 2024, $BUIDL experienced a 5.93% increase in net inflows, reaching $483,311,326.32 in assets under management. The decision to tokenize such a fund is justified by the utility it brings. For instance, $BUIDL, issued on the Ethereum public blockchain via Securitize, was utilized as collateral on prime brokerage FalconX to secure loans and collateralize derivatives positions.
In the realm of venture capital, there have been discussions about using tokenized money market funds (such as $BENJI) to fund portfolio companies. This approach allows venture capitalists to directly provide their companies with yield-generating assets to hold in their treasury, with the transparency enabled by blockchain technology offering insight into the utilization of the funds.
Numerous instances of cost savings and utility have been uncovered through proofs of concept and in-production use cases. For example, Broadridge has reported $1 million in savings for every 100,000 repo transactions, while JPMorgan’s Onyx has streamlined portfolio rebalancing and reduced cash drag from discretionary portfolios using smart contracts. Additionally, Figure has tokenized over $7 billion worth of HELOCs, saving 150 bps in the process, and Hashnote’s USYC product aims to enhance yield for banks and customers by accessing the intraday market in collaboration with Broadridge.
The assets being tokenized encompass a wide range, including on-chain equity, fund LP units, real estate, debt, and more. According to Security Token Market’s RWA Securities Market Update for June 2024, a hypothetical security token bundle of all tracked RWAs outperformed the Crypto 20 Index, closing out June 2024 at a +13.73% return, in contrast to the index’s -11.74%. The decline in the crypto market could be attributed to macroeconomic factors, including expectations of fewer rate cuts. This, combined with net outflows from spot bitcoin ETFs, has resulted in negative sentiment in the crypto space, impacting bitcoin’s price and, consequently, the prices of other cryptocurrencies in the Crypto 20.
Considering these developments, it is evident that RWA tokenization is gaining momentum, offering enhanced efficiency, transparency, and utility across various asset classes. The potential for cost savings and improved access to liquidity and yield makes it a compelling proposition for institutional players and investors alike.