The tokenization of stocks may not yield immediate, substantial advantages for the crypto market; however, these benefits could increase with the enhanced integration of such assets on blockchains, according to NYDIG.
“The initial advantages for networks housing these assets, like Ethereum, may be minimal, but they grow as their accessibility, interoperability, and composability improve,” said Greg Cipolaro, NYDIG’s global head of research, in a note on Friday.
Initially, transaction fees for using tokenized assets will be a primary benefit, while the blockchain supporting them will “experience increasing network effects” for their storage, Cipolaro added.
Tokenization of real-world assets (RWAs), like US stocks, has become a trending topic in the crypto sector, with major exchanges such as Coinbase and Kraken eager to roll out tokenized stock platforms in the US following their success abroad.
Earlier this month, Securities and Exchange Commission chair Paul Atkins indicated that the US financial system could adopt tokenization within a “couple of years,” with Cipolaro commenting that “tokenization is likely going to be a significant trend.”
“In the future, these RWAs could integrate with DeFi (composability) as collateral for loans, assets for lending, or for trading,” he noted. “This will require time for technology advancements, infrastructure development, and regulatory changes.”
Tokenized assets can “differ greatly”
Cipolaro emphasized that creating composable and interoperable tokenized assets is complex, as “their form and function can vary significantly,” often existing on both public and private networks.
Currently, the Canton Network, a private blockchain developed by Digital Asset Holdings, stands as the largest blockchain for tokenized assets, boasting $380 billion, or “91% of the total ‘represented value’ of all RWAs,” Cipolaro explained.
On the other hand, Ethereum remains “by far and away” the leading public blockchain for tokenized assets, with $12.1 billion of RWAs deployed on it, he noted.
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“Yet even on a public, permissionless network like Ethereum, the design of specific tokenized assets can vary widely,” Cipolaro remarked. “These RWAs often require traditional financial structures such as securities, broker-dealers, KYC/investor accreditation, whitelisted wallets, transfer agents, and more.”
He added that although tokenized assets still rely on traditional financial frameworks, companies leverage blockchain technology for benefits such as “near-instant settlement, 24/7 operations, programmatic ownership, transparency, auditability, and collateral efficiency.”
“In the future, if regulations become more favorable, as Chairman Atkins suggests, access to these assets should become more democratized, potentially expanding the reach of these RWAs,” Cipolaro stated.
“Investors should take note,” he cautioned, “even if the economic implications for traditional cryptocurrencies are minimal at present.”
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