According to CoinDesk, the tokenization of real world assets (RWA) is gaining traction among institutions, with financial giants like BlackRock entering the space with their own tokenized assets. Blockchain technology is being leveraged to issue, manage, and distribute traditional assets more efficiently than their off-chain counterparts, particularly private and alternative assets.
Security Token Market has been monitoring this space since 2018 and has tracked over 600 tokenized products. A key example of an asset that institutions are increasingly deploying is the BlackRock USD Institutional Digital Liquidity Fund ($BUIDL). This tokenized money market fund saw a 5.93% increase in net inflows, closing out June 2024 with $483,311,326.32 in assets under management (AUM).
The token, issued on the Ethereum public blockchain via Securitize, was recently used as collateral on prime brokerage FalconX to secure loans and collateralize derivatives positions. In the venture capital sector, there is interest in using tokenized money market funds to fund portfolio companies, with the advantage of being able to directly send a yield-generating asset to hold in their treasury and track how the money is used through blockchain.
There are several examples of cost savings and utility being realized through proofs of concept and in-production use cases. Broadridge reported $1M savings for every 100K repo transactions, while Onyx by JPMorgan, through a Project Guardian proof of concept, reported cutting rebalancing portfolios from 3,000 steps to a few clicks of a button. This also resulted in eliminating cash drag from discretionary portfolios by around 18% annually through the use of smart contracts.
Security Token Market covers a range of tokenized assets including on-chain equity, fund LP units, real estate, and debt. According to their June 2024 report, a hypothetical security token bundle of all STM-tracked RWAs outperformed the CoinDesk 20 Index, closing out June 2024 at +13.73% versus the index’s -11.74%. This drop in the crypto market could be attributed to macroeconomic factors and expectations of fewer rate cuts, which along with spot bitcoin ETF net outflows, created negative sentiment in the crypto space, impacting bitcoin’s price and therefore other cryptocurrencies’ in the CoinDesk 20.