Beyond Banks: Crypto Natives and the Rise of Real-World Asset Tokenisation

Real-world asset tokenisation has been heralded as the intersection between decentralised and traditional finance. The first sprouts of RWA adoption were seeded back in 2015, when banks looked past their anti-crypto stance to consider the groundbreaking potential of blockchain technology. The utility of asset tokenisation has evolved significantly since then – and more than just banks are starting to notice.

What is Real-World Asset Tokenisation?

Distributed ledger technology allows RWAs – like fiat currency or the ownership of equity – to be securely managed, distributed and held on the blockchain. Simply, real-world asset tokenisation involves digitising physical assets and representing the underlying asset with a unique token. 

How Can It Be Used?

Banks were the first in traditional finance to experiment with the power of blockchain tech for RWA tokenisation. Distributed ledgers support a cheaper and more efficient method of managing high-volume, international transactions – perfect for a big bank. 

As General partner at Electric Capital, Maria Shen told CNBC: “When RWA first started trending we looked at institutions like high-net-worth individuals, family offices, pension funds and university endowments.”

The industry has seen financial colossuses like JPMorgan and Citibank suggest that up to US $5 trillion worth of real-world assets may be digitised by 2028 – creating a market more than four times the size of the crypto market today.

But the use case of this technology has blossomed in recent years, with smaller companies and even individuals demonstrating an appetite for RWA tokenisation. Ms Shen touched on how the industry sees retail users adopting stablecoins for remittances and savings, particularly during this high-inflation environment where sending fiat currencies abroad may be expensive. 

Even small businesses are beginning to pay their international suppliers in stablecoins (or other cryptos) to avoid the fees that come with foreign exchange.

Crypto natives aren’t missing out on the rise of RWA tokenisation either. A few months ago, prominent DeFi org MakerDAO purchased $700 million U.S. Treasury Bills (T-Bills) to diversify the assets backing its stablecoin, DAI. In that sense, MakerDAO has increased the role of alternative investments in supporting fiat-pegged stablecoins and essentially begun tokenising T-Bills.

RWA in Australia

Down under, banks were also the earliest institutions to adopt tokenisation. Australia and New Zealand Banking Group (ANZ) became the first bank to mint a stablecoin pegged to the Australian Dollar. And the Reserve Bank of Australia (RBA) is strongly considering whether to start issuing a central bank digital currency (CDBC).

But enthusiasm for tokenising RWAs has spread to other industries, too. At this year’s Australian Blockchain Week, experts claimed that tokenisation would be the catalyst for bringing blockchain-based financial products to the average user. The mood has shifted – a few years ago, everyone was up in arms about the investment potential of the crypto market. But now, perhaps the market’s biggest economic driver – the cost-effectiveness of tokenisation – is starting to settle in.