Institutions Bet Big on Tokenization of Real-World Assets: State Street Joins the Foray
State Street has partnered with Swiss crypto firm Taurus to launch a new service that will enable the tokenization of real-world assets. This strategic alliance aims to cater to the growing demand among institutional investors for digital asset services that blend traditional and decentralized finance.
Tokenization is the process of converting the ownership rights of traditional assets into digital tokens on a blockchain. Proponents argue this process enhances transparency and security, thereby simplifying trading processes.
State Street Jumps on the Tokenization of Real World Assets (RWA) BandwagonState Street, a US-based financial services company, already administers crypto funds and provides accounting services. This partnership will also take on custody of clients’ crypto assets and assist in creating tokenized assets, including various funds and securities.
Read more: What is The Impact of Real World Asset (RWA) Tokenization?
Donna Milrod, Chief Product Officer at State Street and Head of Digital Assets Solutions, emphasized the new service’s dual-focus approach.
“We need to provide our clients the ability to deal with both traditional finance and digital assets side by side,” Milrod stated.
This service responds to institutional clients’ need for reliable banking partners to serve as custodians for their crypto holdings. It offers a safer alternative to less secure crypto exchanges or wallet providers.
The introduction of this service is timely. It aligns with the launch of several spot Bitcoin and Ethereum exchange-traded funds this year, which have significantly attracted institutional capital.
Institutional interest in digital assets extends beyond State Street’s new offerings. For example, BlackRock launched its first tokenized fund, the BlackRock USD Institutional Digital Liquidity (BUIDL), on the Ethereum blockchain earlier this year.
It has already achieved a market value of around $502 million. The fund represents a significant step in integrating traditional finance (TradFi) with decentralized finance (DeFi). It offers US dollar yields with increasing dividends, signaling institutional appetite.
Similarly, Franklin Templeton has ventured into tokenization with its Franklin OnChain US Government Money Fund (FOBXX), which recently expanded to the Arbitrum blockchain. This move is part of a broader strategy to integrate more deeply with DeFi.
Moreover, the tokenized US Treasury securities market has also seen substantial growth. Data from RWA.xyz indicates that this sector’s total market value expanded to $2.34 billion this year. Both BlackRock’s BUIDL and Franklin Templeton’s FOBXX are major players in this arena, contributing remarkably to the market’s expansion.
Read more: What is Tokenization on Blockchain?
Tokenized Treasury Market Capitalization. Source: RWA.xyz
The enthusiasm for tokenized assets is evident across various sectors of the financial industry. According to Deloitte, the rising dividend yields from such funds demonstrate a clear preference among institutional investors for products that offer enhanced liquidity, accessibility, and efficiency compared to traditional funds.
“While fund tokenization is not without its management, legal, and regulatory challenges, it has the potential to transform the shape of private asset funds and resolve the concerns of regulators regarding such assets. There are significant benefits in terms of lower costs and higher revenues for service providers and asset managers. Investors find the ability to diversify their portfolios and enhance the liquidity of their investments very appealing”, Deloitte report read.
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