Tokenization isn’t a Mario Kart maneuver—it’s a phenomenon that’s moving from the fringes of the crypto sphere to desks across Wall Street.
A tokenized asset is basically a bridge between traditional finance (TradFi) and decentralized finance (DeFi). It is a token that represents any equity, bond, or even fund—and crypto bros are going crazy for it.
Back in 2021, Binance tried to launch tokens of a few US stocks, including Tesla and Apple. But the project backfired after regulators caught wind of the venture.
However, now that the US has a set of newly minted crypto-friendly regulators, crypto firms are running with Binance’s playbook. The Securities and Exchange Commission itself even held a tokenization roundtable.
That’s why just last month the crypto exchange Kraken disclosed it was planning to offer tokenized versions of roughly 50 stocks and ETFs, including Apple, Tesla, and Nvidia. Like cryptocurrencies, investors can trade tokens 24/7 on the Solana blockchain. And keep in mind, these tokens are backed by real shares of the actual equity or exchange-traded fund they represent.
You might be thinking right about now: Why would I do all that instead of just buying actual Apple, Tesla, and Nvidia stocks? Kraken argues that these equity tokens will give international investors an easier, cheaper way to access the US stock market. Tokenization also allows traders to invest even when the market is closed.
Taking it a step further, crypto investment firm Galaxy Digital is in talks with the SEC about tokenizing its own stock. But it isn’t just crypto bulls who are into tokenizing stocks—even BlackRock CEO Larry Fink wants to get in on the fun.
“Tokenization is democratization,” he wrote in his latest annual letter to shareholders, arguing that it could revolutionize investing.
Should you tokenize your portfolio?
Despite its recent momentum, the actual amount of assets being tokenized is relatively small: just $23.3 billion, according to tracker rwa.xyz. But if you’re a true crypto bull, the rise of tokenization is a broader endorsement of blockchain technology.
“If you agree with me that blockchains are a general use technology—if, for instance, you’re intrigued by the idea of nearly all the world’s assets moving onchain—history suggests you’d want to own a basket of crypto assets: Bitcoin, Ethereum, Solana, Chainlink, and more,” explained Bitwise CIO Matt Hougan in a note.—LB
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