In a joint venture, DigiFT, the leading regulated real-world asset (RWA) exchange, and HashKey Capital have released a comprehensive report titled “RWA Tokenization, The Next Generation of Capital Markets.” The study delves into the burgeoning trends, models, regulatory landscape, and investor appetite surrounding tokenized RWAs, shedding light on the transformative potential of this evolving market.
- Market Potential and Trends: The research highlights the substantial potential of RWA tokenization in capital markets, drawing the interest of major financial institutions. Notably, the Total Value Locked (TVL) in tokenized RWA, primarily concentrated in US Treasury Bill-related products, surged approximately 600% from $100 million at the beginning of 2023 to an impressive $784 million.
- Investor Profile: The majority of investors engaging with on-chain RWAs are institutional, with around 29.1% of tokens held in multi-signature addresses, indicating institutional ownership. Institutional-grade wallets, such as Multi-Party Computation (MPC) wallets and custodial wallets, hold a significant portion (53.9%) of tokens.
- Regulatory Complexity: The report emphasizes the strong institutional presence in the RWA tokenization space, influenced by a focus on qualified investors. Regulatory compliance costs and the intricate processes involved in offering RWAs to retail investors are cited as the primary reasons for this focus.
- Building a New Generation of Capital Markets: RWA assets serve as a bridge between the traditional financial sector and the digital assets world. The research underscores the potential to build a new generation of capital markets with blockchain and smart contracts at their core, offering reduced settlement times, enhanced transparency, and traceability.
- Innovation Models for Market Expansion: To broaden the market, RWA projects are exploring innovative models, including token wrapping and lending, enabling permissionless access to yield from US Treasury bonds. However, compliance with KYC and AML frameworks, sales restrictions, and asset ownership challenges in the decentralized finance (DeFi) space remain hurdles.
- Navigating Regulatory Currents: RWA tokenization encounters diverse regulatory landscapes globally, with the US enforcing strict securities laws, while Switzerland, Singapore, and Hong Kong SAR provide a more favorable regulatory environment. The report anticipates further experimentation in tokenizing financial assets, expanding the scope of RWA in the medium term.
Outlook and Future Prospects
The report concludes with expectations of increased experimentation in tokenizing financial assets and the continued focus on RWA assets tied to US treasury bonds. As the financial sector embraces blockchain-driven innovations, more financial institutions are likely to explore direct issuance models on the blockchain, accumulating practical cases and regulatory frameworks.
Henry Zhang, Founder and CEO of DigiFT, expressed excitement about the growing demand for tokenized RWAs and the evolving landscape, emphasizing the collective efforts to bridge compliance gaps and offer trusted exploration of new ecosystems and market structures.
The collaboration between DigiFT and HashKey Capital provides valuable insights into the transformative potential of RWA tokenization, marking a significant step toward shaping the future of capital markets.
View the report below.
Photo by Timo Wagner on Unsplash
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