Institutions are exploring more options beyond Ethereum for future asset tokenisation. Blockchains with greater interoperability are expected to excel in this space.
With the growing interest from institutional investors in cryptocurrency, tokenisation has emerged as a thriving sector. Recently, asset manager BlackRock made headlines by launching its tokenised fund BUIDL on the Ethereum blockchain, signaling a significant endorsement for the tokenisation market. Experts predict that this market could reach $10 trillion by 2030.
According to Cristiano Ventricelli, vice president of digital economy at Moody’s Ratings, Ethereum is not the only blockchain catching the eye of institutional investors for asset tokenisation. Other networks like Polygon, Stellar, and Provenance, as well as private blockchains like Hyperledger and R3, are also making strides in this area.
Tokenisation involves converting traditional assets into digital tokens that can be stored securely and transferred using blockchain technology. Moody’s Ratings and other firms are closely monitoring this sector, noting that tokenisation could improve liquidity for typically illiquid investment assets such as real estate, venture capital, private equity, and art.
Public blockchains like Polygon and Stellar have been leading the charge in tokenisation. For example, Franklin Templeton launched a tokenised money-market fund on Stellar in 2021 and later expanded to Polygon’s public proof-of-stake chain. These firms are leveraging public blockchains to access a wider pool of liquidity compared to traditional financial systems.
Stellar has partnered with asset manager WisdomTree to issue “digital funds,” similar to mutual funds but stored on the blockchain for added transparency. The transparency of public blockchains allows investors to scrutinise issuers more effectively, especially for asset classes like private credit.
Interoperability, or the seamless transfer of assets between different blockchains, is crucial for the mainstream adoption of tokenisation. Ethereum and Polygon are well connected with various crypto bridges, while Stellar is working on improving its interoperability through recent upgrades like Soroban.
Overall, the tokenisation market is evolving rapidly, with different blockchains offering unique advantages for institutional investors. As the sector continues to grow, interoperability will play a key role in determining the success of tokenisation projects.