Traditional Finance Giants Investing in Tokenization of Assets: Report

• Traditional finance firms are looking into the tokenization of assets such as money market funds and green bonds.
• The firms are drawn by the transparency of tokenized assets and their quick settlement time.
• London Stock Exchange Group and Mirae Securities are some of the firms to have invested in tokenization.

The prolonged bear market might have kept trading volumes down, but it hasn’t discouraged large traditional finance firms from looking into blockchain, a Reuters report details. Traditional finance companies are mostly interested in asset tokenization and the fast transactions that blockchain offers.

According to the report, over the last few years, a growing number of financial firms have invested in token trading and investment platforms. Companies that have not yet developed these platforms are reportedly planning to do so.

The report listed the London Stock Exchange Group, WisdomTree, and Mirae Asset Securities as some of the firms to have invested in tokenization. On the other hand, Franklin Templeton, UBS Asset Management, and ABN Amro have launched tokenized versions of assets. That includes tokenized versions of money market funds and green bonds. 

The rise in interest comes amidst an institutional tussle for market share and profits. Per the report, many of these institutional investors view tokenization as a cost-reduction idea that would help them save money.

Furthermore, adopters of the technology argue that it offers more transparent trading and increased liquidity. Additionally, they mentioned that blockchain is cheaper than traditional transaction systems and offers a faster settlement time.

The report referenced Dune Analytics data, which puts the tokenized public securities figure at $345 million. While the current figure is a bit smaller than the $1.12 trillion wider crypto market cap, the report stated that tokenized assets are seeing fast adoption and growth.

However, the report detailed that critics have countered that blockchain technology doesn’t have the infrastructural technology to support trading. Moreover, they argued that a lack of regulatory clarity makes diving into the crypto space a risky endeavor.

Despite that, the predictions out of the space show a space for potential growth. According to the report, more than a third of institutional investors in the U.S. and two-thirds of high-net-worth investors plan to invest in tokenized assets. Additionally, a joint report by Northern Trust and HSBS estimated that 5% to 10% of all assets would be digital by 2030.