In brief
- Tokenization could broaden access to various asset classes.
- Liquidity is still an important factor, Securitize’s Carlos Domingo said.
- The growth behind stablecoins shows that, he added.
Tokenization could make it easier for someone overseas to own a slice of Manhattan, but their ability to sell it may be overlooked, according to Securitize co-founder and CEO Carlos Domingo.
When people started experimenting with digital representations of real-world assets years ago, they eventually came to realize that the technology has little bearing on the ability to sell investments quickly, with minimal loss in value, he told Decrypt in an interview.
“Providing liquidity to the asset class is as important as providing accessibility,” he said. “And there was a perception that tokenization was going to make those illiquid assets liquid, and that didn’t happen, because an illiquid asset is illiquid whether you tokenize it or not.”
Whether it’s an ownership stake in an apartment building or a tokenized Pokémon card, Domingo said that a digital asset will inherit the illiquidity of its physical counterpart. That means assets could remain difficult to sell immediately without incurring significant losses.
Domingo said the dynamic could eventually shift as the technology around tokenization develops, but in the meantime, people are focusing primarily on assets where existing liquidity can be amplified, namely cash and U.S. Treasuries.
“We’ve gone in the opposite direction [of illiquid markets], where arguably the most successful tokenized asset is actually the dollar,” he said, pointing to the rise of stablecoins.
Stablecoins, which are often backed by a combination of cash and government debt, are a $300 billion corner of the crypto market, according to RWA.xyz. Meanwhile, tokenized U.S. Treasuries dwarf tokenized stocks, at around $9 billion and $681 million, respectively.
At present, Securitize is among several players taking tokenization to Wall Street, after helping issue BlackRock’s USD Institutional Digital Liquidity Fund (or BUIDL). The money market fund, which exists across several blockchains, has become a $2 billion product since its debut last March.
In an article published in The Economist on Monday, BlackRock CEO Larry Fink and COO Rob Goldstein highlighted tokenization’s potential to “greatly expand the world of investable assets.” They described the technology’s adoption as notable in emerging markets.
Asset classes like real estate are dominated by large institutions today, but the financial giant’s most senior executives posited that “smaller, more accessible units” could broaden access.