Tokenization Is Bringing Investment in the Future to the Masses… And It’s About Time

Written by: Michelle Ray

Real world assets (RWA) are making their way to the blockchain in the form of digital representation. That now includes shares, or fractional shares, of stock in publicly traded companies such as Tesla and Nvidia in the form of tokens. In brief, the ownership of tokenized shares may not (and, currently, does not) represent actual ownership of company equity and tokenized stock markets are ambitiously feeling their way through global regulatory hurdles; however, these markets open a pathway to huge potential for innovation, capitalization, and investment for companies and investors of all stripes who are bullish on this marriage of TradFi and DeFi.

In the existing world of investment finance, shares can only be owned and traded by most investors in companies that are publicly listed on a stock exchange. Tokenization offers a future where even privately held companies can offer shares, derivatives, and even dividends without participation in existing stock markets and without the requirement of accreditation. Tokenizing shares also offers the benefits of 24/7 trading, fractional share ownership, instant settlement, global investment, fast capital and liquidity, and almost any other financial perk or restriction that a company wants to code into their blockchain-based offering. These digital representations of real-world assets are intended to mirror global market price movements for publicly traded shares but can also be created as entirely new ‘packages’ of incentives, based on the public or private company’s desire for issuing them.

While technological and security challenges remain in launching tokenized stock products, the real behemoth in the way is the regulatory monster in the United States. Applications and opportunities for RWA tokenization, including real estate, equities, and derivatives are already launching or available in countries with less stringent financial regulations and less established fintech infrastructure, enabling emerging economies to get way ahead of U.S. innovation. U.S. adoption of tokenized assets is likely to be much slower, restricting access to capital and profit for established and new companies and investors, alike.

More than just technology, Web3 / Layer 3 applications are tearing down the gates that have kept investment in emerging global markets the playground of accredited investors and granting access to financial opportunities to anyone in the world with access to the internet.

Tokenization of assets may well be the next logical marriage of TradFi and DeFi, but regulatory anchors on financial products, investment vehicles, and cross-border money movement are already weighing down what is projected to be a multi trillion-dollar market in the next 10 years.