Think of the biggest knocks on crypto: Cryptocurrencies like bitcoin aren’t “real,” because they’re not backed by hard assets in the real world; They’re highly speculative, and the yo-yoing prices can doom unsophisticated investors; often they’re even ridiculous, with meme-coins and cartoon apes selling for millions.
Whereas most cryptocurrency is an entirely new breed of asset -- from bitcoin to eth to dogecoin – tokenization takes assets from the “real” world and puts them on-chain, marrying the perks of blockchain with assets from the real world. This type of model exists in the world of larger music companies and private equity, says Powell, but it’s not accessible to the smaller players. Tokenization makes these tools more inclusive. “Tokenization has the potential to democratize access to capital markets for borrowers,” says Morgan Krupetsky, Director of Business Development for Institutions and Capital Markets at Ava Labs. “Smaller deal sizes and lower investment minimums are made economically viable.
While FTX and the embarrassments of 2022 still darken the image of crypto, banks and governments have quietly -- almost stealthily -- dabbled in the tokenization of RWAs. The Monetary Authority of Singapore is now tokenizing bonds; they’re working with DBS Bank and JP Morgan. Gold is being tokenized.
To those not in high finance, your eyes might glaze over at the inner-workings of equity funds. And making life cushier for wealthy venture capitalists was not, perhaps, the original vision of Satoshi Nakamoto. Then again, these innovations are appealing to the power players of traditional finance, and these are the very influencers -- whether you like it or not -- that will be needed for the widespread adoption of blockchain and cryptocurrency.
Ras acknowledges that with the Robin Hood app, users actually can buy fractional shares of Tesla or Amazon, but he says this is only because Robin Hood bought a motherlode of popular stocks and lets users buy partial chunks from within the app. You can be forgiven if your Spidey Sense tingles at the phrase “earning yield.” In 2022, it was the very promise of too-good-to-be true yield that led to meltdowns like Celsius. As I, then Celsius CEO Alex Mashinsky confidently told crowds that with “much less risk” than banks, Celsius managed to “deliver high single-digit or low double-digit” returns.
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