Tokenization News Roundup: Pendulum Swings Toward Doubters

Here’s this week’s roundup of the latest stories and reports from CoinDesk and the industry to keep you up to date on the progress of the tokenized real-world assets revolution.

Real-world assets could become a $5 trillion dollar industry, some analysts project. But, without greater credit availability, certain changes tokenization won’t be a meaningful evolution in finance.

Takeaway: Ralf Kubli, board member of the Casper Association, cuts through the splashy trillion-dollar projections for the growth of real-world asset tokenization to warn that the emerging industry needs to focus on standardization to make our financial markets more efficient.

“Let’s avoid the path where financial institutions merely upload financial statements to the blockchain and rethink the quality and types of information financial asset tokenization can provide, which will inevitably rewrite the rules on credit.

Otherwise tokenization will only provide the level of transparency and trust as in existing markets — which haven’t truly improved since the informational deficits that drove the housing market boom and bust in the late 2000s. Do we really want to recreate the conditions that led to the Great Financial Crisis…?”

The tokenization of real-world assets has offered promise and frustration in equal measure, but one blockchain platform claims regulation is the key to success.

Takeaway: An interview with the founders of Swarm, a fully-regulated decentralized platform that tokenizes real-world assets for use in DeFi protocols, supports similar ideas to those in the CoinDesk op ed by Kubli. Standardization and regulation are critical at this juncture for successful tokenization that will ultimately lead to a healthier future for crypto generally.

‘Swarm’s bosses argue the right mix of regulation and decentralization is key to the survival of the crypto sector after the failure of FTX. They argue, ‘The standards for bringing assets on-chain need to be rigorous, and the onus is on those in the tokenization space to get this right. Failing to do so will result in a loss of confidence in the blockchain sector.’”

The platform’s cash management facility has attracted $22 million of deposits since it opened in April.

Takeaway: Blockchain-based credit marketplace Maple Finance has expanded to the U.S. market the opportunity for investors to access liquidity.

“Digital asset firms, crypto investment funds and protocol treasuries often hold substantial amount of cash in stablecoins. Tokenized Treasuries offer them a shield from inflation and a way to earn some yield.” That yield presently is around 4% to 5%, which is why Maple has attracted $22 million of deposits in the first three months that it was available to non-U.S. investors.

Meanwhile, expansion and growth in the RWA space continues apace.

Takeaway: Backed, a developer of tokenized real-world assets (not available to U.S. investors, however), is expanding its products to new blockchains. This will provide more flexibility for decentralized-finance developers leading to more diversity in applications and exposure to a wider base of users.

“One of the greatest challenges when tokenizing RWAs is interfacing between TradFi and blockchain infrastructure. Backed solves this by leveraging Chainlink’s decentralized price feeds.” Backed’s tokenized real-world assets can now be accessed on BNB Chain, Arbitrum, Fantom, Avalanche, Gnosis, Polygon, and Ethereum, with more to come.

Artory is proud to announce key hires, growing the company’s blockchain and financial expertise.

Takeaway: In addition to Treasuries and real estate, the most common example of a tokenization use case is fine art. Artory is a leading platform in this emerging technology and it is expanding its leadership team with the addition of a chief investment officer as well as engineers.

The social media space formerly known as Crypto Twitter – now Crypto X? – also had some cautionary takes on how the tokenization of real-world assets is progressing:

Aug 7 2023 tweet by Thiccy re Goldfinch RWA

The poster, Thiccy, concludes his thread: “rwa stuff is a nice narrative and all but the failures of maple and now goldfinch show that you’re completely shit out of luck if (or when kek) the borrowers rug you why not buy foreign treasuries on-chain instead of lending to Kenyan motorbike companies?”

Thiccy presumably was referring to Maple’s troubles last year: “The new pool indicates that Maple is moving away from uncollateralized crypto lending to crypto trading firms, which resulted in $52 million in bad debt on the protocol and up to 80% losses for select liquidity providers. Those losses came after FTX’s spectacular collapse toppled some of the platform’s largest borrowers.”

As with any emerging technology, there will be bursts of enthusiasm and optimism, followed by criticism and stumbles. But inevitably, the pendulum will swing back.

Edited by Ben Schiller.

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