Blade Labs Vision for Tokenization of Assets in 2024
Tokenization is a rapidly growing trend in finance that opens up new possibilities such as lower costs, faster transactions, liquidity, and access for investors, creators, and consumers. A report by Boston Consulting Group and ADDX (Source 1) predicts that the tokenization of real-world assets will be worth tens of trillions of dollars. Additionally, there are indications that the tokenization of assets such as bonds, equities, and commodities will become more prevalent in the future.
Reports suggest that by 2024, we can expect to see a significant increase in the number of private equity funds seeking to develop new tokenization vehicles for their investors. We can also expect to see the development of more structured instruments, including assets built from new revenue sources such as private credit. This trend is already visible in the market, with TradFi titans such as Hamilton Lane and JP Morgan developing tokenized funds (Source 2).
Tokenization is not a new concept, as it has been around since 2017 when the first wave of initial coin offerings (ICOs) emerged (Source 3). However, tokenization is set to reach its full potential as several factors converge to create a favorable environment for its adoption and innovation.
Here are some of the key trends and developments that will reportedly shape the tokenization of assets in 2024:
Regulatory Clarity and Compliance
It has been reported that the rise of tokenization in 2024 will be driven by global regulatory initiatives to promote the growth of tokenized assets. Governments worldwide are adapting regulations to make it easier to tokenize tangible assets. Notably, countries in Asia such as Hong Kong and Thailand are actively shaping regulations to encourage the use of tokenization for real-world assets. Additionally, regulatory bodies in countries like Japan, the United Kingdom, and Switzerland are considering tokenization for various financial instruments, including fixed income, foreign exchange, and asset management products (Source 4).
In March 2023, the European Union began its Distributed Ledger Technology (DLT) pilot program to explore and implement blockchain-based solutions. Following this, the United Kingdom established a Financial Market Infrastructure (FMI) sandbox under the Financial Services and Markets Act (FSMA) in June 2023 to facilitate innovation in the financial sector.
Furthermore, the Financial Conduct Authority (FCA) in the UK recently announced plans for a fund tokenization blueprint in October 2023, showing a strategic focus on advancing tokenization in investments. The blueprint, released later, aims to provide a regulatory framework for tokenized funds. These developments highlight the collaborative efforts of regulatory bodies worldwide, with 2024 poised to witness significant growth in tokenization supported by a favorable regulatory landscape. (Source 5)
Market expansion and diversification
Reports suggest that 2024 will see more market expansion and diversification for tokenization, as more and more types and categories of assets are being tokenized and offered to a wider and more diverse audience. For example, as per these reports, 2024 will see more tokenization of real-world assets, such as art, real estate, or commodities, which represent a huge and untapped market opportunity. Similarly, 2024 is also predicted to see more tokenization of financial assets, such as equities, bonds, or derivatives, which represent a large and growing market demand. (Source 2)
Stablecoins, tokenized treasuries, and decentralized private credit
One of the most interesting trends for tokenization in 2024 will be the emergence and growth of stablecoins, tokenized treasuries, and decentralized private credit (Source 6). These three types of tokens will play a crucial role in the tokenization of assets in 2024, as they will enable more use cases and applications for tokenization, such as exchange, payment, hedging, or data.
For instance, stablecoins facilitate the cross-border and cross-chain transfer of value among different tokenized assets and reduce the volatility and friction of tokenization. Tokenized treasuries offer a new source of income and risk management for tokenized asset holders, and increase the liquidity and transparency of tokenization. Decentralized private credit creates a new market for peer-to-peer lending and borrowing of tokenized assets, and democratizes the access and opportunity of tokenization.
Physical-backed NFTs, DeFi in climate and regenerative finance
According to reports other trends in tokenization in 2024 will be the innovation and experimentation of physical-backed NFTs, DeFi in climate, and regenerative finance (Source 6). Physical-backed NFTs are linked to a physical asset, such as art, collectibles, or luxury goods, and aim to provide ownership and provenance for tokenization. DeFi in climate leverages tokenization to address the challenges and opportunities of climate change, such as carbon credits, renewable energy, or green bonds. Regenerative finance uses tokenization to support the restoration and regeneration of natural and social systems, such as biodiversity, agriculture, or communities.
These three innovative uses of tokenization demonstrate the potential for creating more value and promoting social good. For instance, physical-backed NFTs will let tokenized asset owners showcase their unique and rare possessions, and open up new markets and experiences for tokenization. DeFi in climate will allow tokenized asset holders to participate in mitigating and adapting to climate change, creating new incentives and solutions for tokenization. Regenerative finance will empower tokenized asset holders to invest in and support the regeneration and resilience of natural and social systems, resulting in new benefits and outcomes for tokenization.
Asset tokenization is a promising concept that has the potential to revolutionize the future of finance in 2024 and beyond. By creating digital representations of physical assets on a blockchain, tokenization can reduce costs, speed up transactions, increase liquidity, and expand accessibility. The trends and advancements shaping the tokenization of assets in 2024 will usher in a new era of innovation and resilience in the year ahead.
Blade Labs has already established itself in this diverse landscape of tokenization, which is set to unfold in 2024 and support businesses and enterprises in their journey towards transformative digital innovation. With a commitment to staying ahead of the curve, we offer innovative solutions tailored to meet the diverse needs of businesses, enterprises, and individuals adopting tokenization. As one of the pioneers in this digital transformation, Blade leverages its innovative prowess to provide customized solutions from the conceptualization of tokens to the minting and distribution of tokens. We strive not only to keep pace with the industry’s rapid changes but also to anticipate and shape the future of tokenization. With a positive and forward-thinking approach, we stand as a trusted partner, empowering entities to harness the full potential of tokenization and thrive in the dynamic landscape of 2024 and beyond.
Senior Content Writer