by • Assets tokenization has been held back by lack of infrastructure and regulatory standards worldwide.
• Tokenization can allow multiple people to own a portion of an asset that would previously have to have been sold as a whole with a higher value.
• Institutional investors are seeking services that work well with what they’re already doing, that are easy to implement, flexible and upgradeable.
Assets Tokenization: Challenges & Opportunities
Real-world assets tokenization has had its share of challenges due to the lack of infrastructure and regulatory standards worldwide. Big Four firm PwC predicts global assets under management to reach $145.4 trillion by 2025, creating an immense opportunity for asset owners and investors alike. This article will discuss the current challenges posed by real-world assets tokenization as well as potential solutions in order to capitalize on this growth opportunity.
Lack of Infrastructure
The merger between decentralized finance (DeFi) and traditional assets has been held back by a lack of infrastructure and regulatory standards worldwide, according to sources Cointelegraph recently spoke with. “There simply haven’t been good institutional-grade systems for these companies to get involved”, said Colin Butler, Global Head of Institutional Capital at Polygon. Without proper systems in place, it is difficult for institutional investors who manage large sums of capital across the world to participate in asset tokenization initiatives due to the lack of security offered by existing options such as regular blockchain wallets or centralized exchanges.
Fractional Ownership
Tokenization is a path towards fractional ownership which allows multiple people to own a portion of an asset that would previously have had to be sold as one unit at a higher value. This lowers the minimum required investment from an average of $5 million down to just $20,000 which opens up opportunities for smaller investors who may not have otherwise had access due investments being too expensive or out-of-reach for them prior. Furthermore, this also increases liquidity since it allows more people from different parts of the world access these investments without having any geographical restrictions imposed upon them like before when only those in close proximity could invest into certain markets or projects due limited availability or ease-of-accessibility issues caused by distance or other factors such as currency conversion rates etcetera.
JPMorgan & Hamilton Lane Initiatives
In January 2021 Hamilton Lane announced the first three tokenized funds backed by Polygon bringing part part of their $824 billion worth in assets under management onto their platform while JPMorgan executed its first cross-border DeFi transaction on public blockchain later that same year; both moves demonstrate how major players are embracing DeFi technology despite the financial risks associated with it due its infancy stage within traditional banking structures globally thus far – although this is expected change soon given recent developments within certain countries throughout Europe such as Switzerland where regulators now recognize digital tokens used on decentralized networks like Ethereum/EOS etcetera as securities rather than just mere cryptocurrencies thereby making them subject applicable laws related thereto including anti money laundering (AML) compliance regulations amongst other things .
Conclusion
Although there remain many challenges associated with real-world assets tokenization particularly related infrastructure development & regulation – we can see clear progress within this space through initiatives taken big players such JPMorgan & Hamilton Lane whereby they are beginning embrace DeFi technology despite inherent risks associated with investing into new technologies like these during their early stages . We expect further developments within this field moving forward given recent developments within some countries throughout Europe particularly Switzerland where regulators now recognize digital tokens used on decentralized networks like Ethereum/EOS etcetera as securities rather than just mere cryptocurrencies thereby opening up possibilities even greater potentials when comes leveraging decentralized finance platforms future applications beyond traditional banking structures globally .
