Tokenization growth to depend on use cases, benefits

Though Ripple is in talks with financial institutions exploring real-world asset tokenization, there remains work to be done before mass traditional finance migration to this space occurs.

James Wallis, who leads business development for RWA tokenization with financial institutions at Ripple, told Blockworks that trillions of dollars worth of assets coming onchain — and the speed at which that happens — will depend on institutions seeing enough value in the use cases that emerge.

The tokenized RWA segment has grown to about $12 billion. That excludes the stablecoin market, which sits at roughly $170 billion.

Some of the cited benefits of tokenization, such as creating efficiencies and broadening investor access to certain assets, “have yet to be fully proven, may not be uniquely achievable through tokenization, and may involve trade-offs that might negate the benefits,” according to a Tuesday report by the Financial Stability Board (FSB). 

Fractionalization mechanisms (like securitization) already aid investor access to certain assets, for example. Atomic settlement may increase liquidity demands on market participants, the FSB report explains. Then there’s the challenge of scaling adoption, which the potential gains of tokenization are likely to depend on.

The FSB adds there is likely to be a blending of tradition and blockchain systems, with the latter used for “asset classes for which the cost-benefit trade-off for tokenization is most clear.”

Back in April, Ripple revealed its plan to launch a USD-pegged stablecoin backed by US dollar deposits, short-term US Treasurys and other cash equivalents.

Last week, the company shared the exchanges and platforms on which the stablecoins — RLUSD — would be available: Uphold, Bitstamp, Bitso, MoonPay, Independent Reserve, CoinMENA and Bullish.

One of the few stablecoins issued under a New York Trust Company Charter, Wallis said the company is working closely with regulators to launch RLUSD “soon,” but declined to comment further.