Tokenizing the Next Trillion Dollars of Assets: Preparing the Infrastructure and Environment for RWA Tokenization and Mass Adoption

Tokenized real-world assets (RWA) have the potential to revolutionize capital efficiency and asset movements, especially as on-chain collateral management and privacy-preserving stablecoins come into focus.

Carlos Domingo, Co-Founder and CEO of Securitize, underscored the origins of security tokens in 2016, noting that their initial failure came as a result of regulatory aversion and technical challenges. Things have moved on since, with the current focus centring on stablecoins, which have gained traction due to their efficiency in collateral management and 24/7 trading capabilities.

“You can bring significant efficiencies and bring them on chain. And it’s not just bringing them for the sake of the asset itself,” Yuval Rooz, Co-Founder & CEO of Digital Asset.

“So, if you actually think about it from a financial institution perspective, there’s a significant opportunity to improve your return on capital,” he added.

Amar Kuchinad, who serves as the Global CEO of Copper.co, said that tokenized assets have great scope and they can solve for many inefficiencies that are currently in the financial system.

“There are problems that need to be solved that tokenized assets can solve, and I think you’ve all touched on it, which is the collateralization and making capital efficiencies,” he noted, adding that for financial institutions these considerations are crucial.

“And when they start considering how they can optimize around their capital, movement of collateral turns out to be a huge unlock,” Kuchinad said.

Eric Wragge, Global Head of Business Development & Capital Markets at Algorand, highlighted the importance of shared ledgers in improving efficiency and reducing disputes in bankruptcy cases.

Rooz, meanwhile, talked about the element of speed. “If you want to trade futures, you need to post two types of instruments. When you start to put your position, called initial margin. It’s the initial margin that is required for you to put on a derivative position. And every day, depending on market movements, you will fund your variation margin using cash,” he explained.

“And as a result of the usage of cash, which is only available during banking hours. Future markets don’t set collateral over the weekend, and therefore cannot offer 24/7 trade.” If all forms of collateral are allowed to be tokenized then it follows that all futures and derivative exchanges would be able to operate 24/7, he added.