Bonds and Real World Assets Tokenization
The tokenization trend is gaining momentum as blockchain technology and decentralized finance (DeFi) continue to revolutionize the financial industry.
Source: Dune Analytics
The market capitalization of tokenized stocks and bonds has surpassed $200 million, showcasing the growing interest in so-called “real-world assets” and their ability to allow investors to have exposure to tangible assets like gold and real estate without physically owning them. Instead, investors only hold the asset in the form of tokens.
Benefits of Tokenized Financial Assets
Starting with stocks and bonds has several significant advantages:
Increase Liquidity: Crypto never sleeps; trade anytime.
Accessibility: Smaller investment amounts make ownership more accessible, although that’s not always the case, and some platforms still require a higher minimum purchase ($100,000 USDC) to mint tokens.
Reduced Transaction Costs: Even when ETH gas prices are high, blockchain still beats traditional finance when it comes to the cost of settling transactions.
Reliable Collateral: Tokenized securities may provide a more reliable type of collateral for borrowing compared to volatile crypto assets like BTC or ETH.
Additional Yield Options: In crypto bear markets, safe yields can be challenging to find. Tokenized securities bring additional yield options with less-volatile assets.
Transparency: Lastly, transparency is another notable aspect as everything is traceable, secure, and immutable thanks to blockchain technology. Issuers like Matrixdock provide a daily asset statement, so you can verify on-chain and off-chain activity.
Tokenized Bonds and Stocks Examples
In this context, there is a gradual shift from stablecoins to tokenized assets. This is partly due to the potential for these assets to appreciate on their own, making them attractive to investors. Moreover, it is important to note that the global bond market reached $133 trillion in 2022, while the market capitalization of US stocks reached $40 trillion, so there is a huge potential in tokenizing this type of financial products.
According to a Dune Analytics, this week saw the tokenized versions of publicly traded securities surpassing a market capitalization of $200M.
Source: Dune Analytics
Taking the lead in the market is OUSG, which represents Blackrock’s short-term U.S. treasury bond ETF (SHV) in tokenized form, commanding a market share exceeding 60%. Ondo Finance successfully launched OUSG in January. Both Ondo and Matrixdock lead with US Treasury offerings.
SBTB, the second highest tokenized security by market capitalization at $72M, represents short-term treasury bills and is issued by Matrixdock. Similar to Ondo’s OUSG, SBTB can only be minted by accredited investors.
The Future Of Tokenized Assets
These figures demonstrate the increasing adoption of tokenized assets and their impact on financial markets. As more investors are drawn to this form of investment, it is likely that market capitalization will continue to rise and expand to other types of assets, providing new opportunities and possibilities in the financial realm. Until this year, despite the emergence of tokenization as a prominent use case for traditional securities in the business world, blockchain-based securities had not gained significant traction.
At CommonSense Finance, we have observed the surging interest in tokenized assets from individuals and institutions too. As a result, these assets are positioned to assume a substantially more influential role in the portfolios of alternative asset investors. In response to this growing trend, we are actively working towards meeting the demands and expectations of our clients by soon introducing portfolios of tokenized Real World Assets (RWA).
