Tokenization News Roundup: Avalanche Invests $50M in RWA

As with any fresh new opportunity, there is a lot of news and activity from self-professed experts and media, as well as the players themselves. This week we find broad overviews and explainers from CoinDesk and Binance, balanced with descriptions of individual tokenization projects in Colombia and Spain and an opinion piece about why Asia is uniquely positioned to take advantage of the RWA trend. RWA is a global trend, and this roundup of RWA news for the week ending July 27, 2023 takes you around the world.

The program follows Avalanche’s initiative to financial institutions to test blockchain services on one of its subnets.

Takeaway: Blockchains such as Avalanche are competing to grab a slice of the tokenized real-world assets pie, which is projected to become a $16 trillion market by 2030 by Boston Consulting Group.

  • Ethereum, the largest smart contract platform, is the most popular network for tokenized assets, but smaller blockchains such as Stellar, Solana and Polygon also grab sizable market shares, according to real-world asset data platform rwa.xyz.

  • Avalanche is an Ethereum challenger smart contract platform offering faster transactions and scaling capabilities. It consists of smaller sovereign networks called subnets.

  • The tokenization fund follows the blockchain’s initiative for financial institutions to test and deploy blockchain-based services on one of its subnets. Asset management companies WisdomTree and T. Rowe Price were among the firms who joined the testing, CoinDesk reported in April.

Decentralized finance platform Credix opens a trade receivables lending pool with the Solana Foundation among the investors.

Takeaway: This is a single example of the creative ways crypto and TradFi are capitalizing on rising yields that are partly fueling the growth in the tokenization of real-world assets.

  • Lenders can capture near 11% annual yield investing in insurance-protected private credit to Colombian farmers backed by receivables, said Credix, which believes the pool could swell to $150 million over the next months based on capital demand in the country.

  • “This groundbreaking initiative not only brings a unique offering to the market but also holds power to make a significant social and economic impact by providing crucial financial support to farmers in Colombia,” Thomas Bohner, chief executive of Credix, said in a statement.

  • Accredited investors can deposit USDC stablecoin in the pool and expect a 11% annualized yield (APY). This is significantly higher than the 2.6% APY available for lenders on DeFi protocol Aave, according to DefiLlama.

The firm started issuing tokens representing equity in a Spanish real estate investment trust under Spain’s new digital asset supervision.

Takeaway: This is another example of a specific tokenization issuance, distinguished by being the first-ever under Spain’s new digital asset supervision laws.

  • The tokens issued via the smart contract network Avalanche (AVAX) represent equity in Spanish real estate investment trust Mancipi Partners, supervised under the test environment of Spain’s securities regulator (CNMV).

  • “European businesses will be a major beneficiary of this innovation, giving businesses a new way to raise capital through primary capital raises, and obtain potential tax benefits and liquidity through secondary trading,” Carlos Domingo, co-founder and CEO of Securitize, said in a statement.

Across Asia, projects dedicated to asset tokenization have become a cornerstone of the new digital economy, showing the world the technology’s possibilities.

Takeaway: Asia, particularly Hong Kong, is preparing how to get a piece of the RWA market. This opinion piece describes efforts in Cambodia and Hong Kong to tokenize assets, including fiat currency.

“Another example on the retail side is a new pilot initiative being led by the Hong Kong Monetary Authority (HKMA) to explore and showcase real estate asset tokenization solutions. The pilot will examine and stress-test different mechanisms for enabling a faster and more efficient release of equity relative to real estate for individuals. With real-world asset tokenization predicted to be a multi-trillion-dollar industry by 2030, the pilot represents a significant step forward in the race to maximize readiness for the retail application of such a tokenized product.”

Takeaway: Non-fungible tokens, or NFTs, are associated with pixelated profile pictures that crypto enthusiasts use on their social media accounts. But as an instrument, some tokenized real-world assets are NFTs. That makes recent developments from the U.K. particularly relevant. The Law Commissioner’s report on digital assets (released in June 2023), may lead to the country becoming an NFT hub.

  • One of the key implications of the Law Commission’s report is the creation of a robust legal infrastructure that bolsters the NFT ecosystem. By providing clarity on ownership rights, intellectual property protection and contractual agreements, the UK stands to attract those artists, creators and businesses from around the world wishing to gain exposure to this nascent technology.

  • The new-found legal certainty will significantly reduce the risks associated with NFT transactions, whereby fostering trust and encouraging greater participation within the market. In addition, the report also recommends the establishment of a dedicated regulatory body tasked with overseeing NFT-related activities. This move not only ensures compliance with existing legislation but also demonstrates the UK’s commitment to fostering a vibrant and secure NFT landscape. Such regulatory oversight will provide a competitive advantage over other jurisdictions, positioning the UK as a reliable and trustworthy hub for digital asset transactions.

Takeaway: The headline says it all; this is the first digital-asset service provider license issued by France, and it went to the blockchain arm of 150-year-old investment bank Société Générale.

“The DASP license, beyond giving Société Générale Forge the authority to act as a custodian for digital assets, provides the bank’s blockchain unit with broad permissions.  This includes,

  • the ability to facilitate transactions involving the buying and selling of digital assets using legal tender;

  • trading of digital assets for other such assets;

  • and the ability to receive and transmit third-party orders for digital assets

The French DASP system presents a more intricate setup compared to the registration procedure for cryptocurrency companies, which typically only mandates compliance with the nation’s anti-money laundering regulations.”

Takeaway: Notable mostly because it is produced by the research department of Binance, the world’s biggest crypto exchange by trading volume. It is a great introduction to the tokenization of real-world assets generally and an overview of the market, with profiles of three popular protocols. While everyone (including yours truly) and their grandmother keeps citing BCG’s $16 trillion RWA market projection, Binance research takes it further to put that astounding figure in context of global asset value overall, indicating huge potential for further growth.

“Even at US$16T, tokenized assets will still be a small fraction of the current total global asset value, estimated to be worth US$900T (less than 1.8%, to be exact, and not factoring in future global asset value growth). One may even argue that the true addressable market is the entire global asset market, given that anything tokenizable could be represented as RWAs on-chain.”

Traditional finance giants are excited about the idea of putting ownership of assets like precious metals, art, homes and more on the blockchain.

Takeaway: Toby Bochan, CoinDesk’s managing editor of Learn, introduces the concept of tokenization of real-world assets for beginners. What it is, how it works, and what the future holds. An excellent explainer to share with novice investors.

Imagine you want to buy an Andy Warhol artwork. Most of us can’t afford to fork over record-breaking sums like $195 million for a Marilyn painting or even $850,000 for a mere print of Queen Elizabeth. Many people want to buy art either for pleasure or as an investment but are priced out. But what if you could buy “shares” of an artwork like you can buy fractions of a publicly traded company? That’s the idea behind tokenization of real-world assets.

Edited by Ben Schiller.

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