As Wall Street eyes tokenization, a lack of market infrastructure presents hurdles
Tokenized real-world assets (RWAs) – which refer to assets like real estate that have been turned into digital tokens on a blockchain to enable easier buying, selling, and trading – are expected to surge in the coming years. For instance, global investment firm VanEck forecasts that the RWA market will surpass $50 billion this year.
However, for tokenized assets to grow, they need a trusted marketplace where investors can easily buy and sell them, according to industry expert Aaron Kaplan, the co-CEO of Prometheum, a firm that is currently building market infrastructure for digital asset securities.
Right now, the RWA market is analogous to companies selling stock, Kaplan tells TheStreet Crypto – but without stock exchanges like Nasdaq or the New York Stock Exchange to make trading simple and accessible.
“Imagine if public companies had to sell shares directly to investors without a stock market like Nasdaq or the New York Stock Exchange — that’s essentially where tokenized real-world assets stand today,” Kaplan tells TheStreet Crypto.
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“There are more than $100 trillion worth of securities in the U.S. that could be tokenized, issued and transferred on blockchains, but without a federally licensed exchange or trading venue, investors are stuck on the sidelines,” Kaplan explains. “Once we have a liquid, public market infrastructure to support tokenized RWAs and digital asset securities, you will see a wave of Wall Street firms developing and issuing new and innovative blockchain native investment vehicles.”
However, tokenized RWAs have attracted the attention of the U.S. Securities and Exchange Commission (SEC), which has stated that under the Howey Test, the asset class may be viewed as securities needing to comply with anti-money laundering (AML) and know-your-customer (KYC) rules, along with standard disclosure requirements.
Despite potential regulatory challenges, the appetite for tokenized financial products continues to grow. BlackRock, the world's largest asset manager, released its own tokenized money-market fund last year, and other Wall Street players are now looking at similar opportunities, signaling increasing interest in this space. As adoption steadily accelerates, Standard Chartered estimates that the tokenized RWA market could reach over $30 trillion in less than a decade, while McKinsey forecasts a market size of $2 trillion in just five years.
