The market for tokenized real-world assets (RWAs) is expanding rapidly, yet a common misconception is that regulatory challenges are the primary obstacle to widespread adoption. In a recent interview, Aaron Kaplan, founder and co-CEO of Prometheum, highlighted that the true limiting factor is the absence of dedicated secondary markets for the buying and selling of tokenized securities.
Kaplan referenced remarks made by ARK Invest CEO Cathie Wood during her participation in the Digital Asset Summit in New York, where she identified regulatory ambiguity as a barrier to her firm’s ability to tokenize funds. However, Kaplan argued that the existing framework provided by the U.S. Securities and Exchange Commission (SEC), including its special purpose broker-dealer framework and the Alternative Trading System (ATS) licensing, already paves a compliant pathway for blockchain-native funds that present advantages over traditional issuances.
According to industry data, the total value of tokenized RWAs has surged nearly 8% to $19.5 billion over the past month, excluding stablecoins, with private credit and U.S. Treasury debt emerging as the two primary use cases. Despite this growth, Kaplan noted that these assets are concentrated on a few blockchains with no fully public secondary markets accessible to both institutional and retail investors.
The value of tokenized RWAs has grown rapidly over the past year. Source: RWA.xyz
To develop these secondary markets, Kaplan proposes two primary approaches: first, employing decentralized finance (DeFi) frameworks to establish tokenized securities markets, akin to the initiatives undertaken by Ondo Finance and Securitize. Secondly, he suggests integrating tokenization protocols into existing brokerage platforms operated by SEC-registered entities complying with federal securities laws.
As established crypto and fintech platforms are already positioned to facilitate cryptocurrency trading, the expectation is that they will broaden their services to include tokenized securities. However, traditional financial firms remain competitive, investing in their own tokenization initiatives or forming partnerships with tech firms to maintain market relevance.
“What’s at stake is the next wave of users onboarding into the digital asset space. The question is whether the brokerage industry will integrate into the digital asset realm or if crypto platforms will create the next generation of markets for investor engagement with digital securities,” Kaplan stated.
Prometheum, as a firm specializing in digital asset trading and custody, aims to bridge existing market infrastructure barriers by establishing a comprehensive digital asset securities marketplace. This model boasts reduced transaction fees, expedited settlement times, and enhanced operational efficiency.
Investor demand for tokenized assets is surging, particularly among traditional investors seeking ‘digital native’ versions of assets. Real estate appears to be a significant area of growth, with numerous luxury and commercial properties being tokenized across North America, prompting the evolution of secondary markets for trading tokenized shares.
A report from the Boston Consulting Group (BCG) identified tokenization as a transformative blockchain application in financial services, predicting that it could enhance investor returns by approximately $100 billion while simultaneously increasing revenue streams for financial institutions.
Tokenized RWAs as an investable asset class reached an inflection point in 2023. Source: Boston Consulting Group
Moreover, insights from the World Economic Forum underscore the potential of tokenization to unlock vast amounts of untapped capital within financial markets by enhancing collateral mobility and capital efficiency, thereby optimizing liquidity for traders.
