Coinbase, the crypto asset giant, wants to let its customers to buy shares… in the form of tokens. This is another step towards the merger of traditional finance and decentralized technologies. This movement, which was still marginal a few years ago, is gaining momentum: regulators, platforms, and investors are preparing for the era of “Real World Assets” on blockchain. Asset tokenization is no longer a futuristic idea.
Coinbase is currently seeking SEC approval to offer this service to its customers. Robinhood, meanwhile, has submitted a 42-page document to the US authority arguing in favor of a national framework for real-world assets. The SEC itself has stated that regulating these assets is now one of its priorities.
On June 4, Binance published a report showing 260% growth in the tokenized asset market since January. Private credit (58%) and US debt (34%) dominate this segment.
If “RWA” still makes you think of “risk-weighted assets” on bank balance sheets, then you should definitely keep reading this article. The acronym here refers to “Real World Assets,” which are real-world assets (real estate, bonds, commodities, etc.) accessible on the blockchain. This also includes monetary assets: a stablecoin is nothing more than the tokenized form of a currency.
The principle: assets converted into tokens
Tokenization involves transforming the rights attached to an asset into a digital token. This token can then be split, integrated into automated mechanisms using smart contracts, and finally exchanged.
But before we go into detail about how it works, let’s look at why this practice is of interest to equity markets.
Let’s take a fictional example: Apple decides to issue tokenized shares via Coinbase.
The role of the smart contract
This is a computer program that runs automatically if all conditions are met. It can:
The contract contains all the information inherent to each transaction. As a result, the contract has complete control over everything related to the transaction itself and everything involved in holding such a security.
What if markets were already efficient enough?
One might think that tokenization is superfluous. But it introduces structural improvements:
And this model is not limited to financial markets.
Beyond markets: a revolution for illiquid assets
Liquidity is a minor issue on the stock market. But imagine the effects of tokenization on alternative investments: works of art, valuable spirits, real estate. An owner can already sell a share of their asset to obtain liquidity quickly on specialized platforms.
The key takeaway is that tokenization removes barriers. Like any truly useful innovation, it will eventually become mainstream. It is a direct application of the principle of economic efficiency. It can be linked to Joseph Schumpeter’s concept of creative destruction, but also to many economic references related to growth fundamentals.
