Financial Assets Might Become Tokenized, Investor Predicts

An investor on X has predicted that every traditional financial asset, from stocks to real estate, will ultimately be tokenized on blockchain networks.

All of Wall Street is going to get tokenized.

Markets will become 24/7/365.

Bitcoin was the first — tokenized gold.

Stablecoins were next — tokenized fiat.

Eventually every financial asset will get tokenized.

Just a matter of time.

— Pomp 🌪 (@APompliano) March 30, 2024

He said the tokenization revolution is coming to Wall Street and will usher in 24/7 global trading.

“Bitcoin pioneered tokenized assets as “digital gold,” with stablecoins following as tokenized fiat currencies, and every asset in the market will follow soon,” he stated.

BlackRock CEO Sees Bitcoin ETFs as ‘First Step’ Towards Tokenizing All Assets

After years of back-and-forth with regulators, the first Bitcoin exchange-traded funds (ETFs) have finally landed in the U.S.

According to Larry Fink, CEO of investment giant BlackRock, this is the gateway to broader tokenization trends across all financial markets.

Speaking to CNBC in January, Fink proclaimed, “ETFs are step one in the technological revolution in the financial markets. Step two is going to be the tokenization of every financial asset.”

The BlackRock chief’s comments signal that crypto ETFs have been the industry’s prime focus until now. However, their real value could pave the way for representing other real-world assets like stocks, bonds, and real estate as tokens on blockchains.

The core premise of tokenization is using blockchain and crypto technology to transform how assets are issued, traded, and settled. 

Rather than being represented by opaque, official processes, asset ownership would be recorded transparently and immutably on distributed ledgers.

“If you had a tokenized security…the moment you buy or sell an instrument, it’s known, it’s on a general ledger that is all created together,” Fink explained. “This eliminates all corruption, having a tokenized system.”

Tokenization advocates argue this would reduce settlement times from days to minutes and slash operational costs. This will also enable 24/7 global trading and enhance regulatory oversight by providing an immutable audit trail.

Regulatory Pathway and Possible ETH ETF Approval

However, the road to tokenizing financial markets is riddled with regulatory hurdles around securities laws, taxation, investor protections, and cross-border policies.   

Crypto advocates have already spent years waging an uphill battle to convince the U.S. Securities and Exchange Commission to greenlight spot Bitcoin ETFs that track the crypto asset directly.

The recently approved Bitcoin funds are based on futures contracts, providing indirect exposure many see as a compromise while regulators study the asset class. Fink believes a similar path could unfold for tokenized securities:

“I wouldn’t be surprised if forward-looking regulators started introducing concepts allowing for tokenized insecurities to co-exist with current traditional markets.”  

While the initial Bitcoin ETFs capture headlines, Fink also highlighted the next likely battleground – Ethereum ETFs providing exposure to the world’s second-largest crypto asset.

“I see value in having an ETH ETF,”

He stated that the SEC is facing a deadline in May to approve or reject applications for Ether-based funds.

Ethereum’s blockchain is seen as a prime platform for tokenizing assets due to its smart contract capabilities and emergence as a base layer for decentralized finance (DeFi) protocols.

Ultimately, Fink and other tokenization backers see the trend as opening investing to a wider pool of participants via fractionalization. 

This will allow even modest investors to gain exposure to assets currently off-limits due to high costs and minimums.

“Imagine being able to buy a fraction of a piece of art, real estate in a specific community, or a portion of an investment fund,”

Stated the BlackRock CEO. 

“That market doesn’t exist today because there’s too much pricing opaque…with tokenization of assets, that market is possible,

He added.