Why tokenized assets cannot thrive without liquidity: Securitize CEO

Tokenization could make it easier for someone abroad to own a piece of Manhattan, but their ability to sell it could be overlooked, according to Carlos Domingo, co-founder and CEO of Securitize.

When people started experimenting with digital representations of real-world assets years ago, they eventually realized that the technology had little impact on the ability to sell investments quickly with minimal loss of value, he said. Declutter in an interview.

“Providing liquidity to the asset class is as important as providing accessibility,” he said. “And there was a perception that tokenization would make those illiquid assets liquid, and that didn’t happen, because an illiquid asset is illiquid whether you tokenize it or not.”

Whether it is an ownership interest in an apartment complex or a tokenized Pokémon cardDomingo said a digital asset will inherit the illiquidity of its physical counterpart. That means assets can remain difficult to sell immediately without incurring significant losses.

Domingo said the dynamics could eventually change as the technology around tokenization develops, but in the meantime, people are primarily focusing on assets where existing liquidity can be strengthened, namely cash and U.S. Treasury bonds.

“We went in the opposite direction [of illiquid markets]with perhaps the most successful tokenized asset actually being the dollar,” he said, pointing to the rise of stablecoins.

Stablecoins, which are often backed by a combination of cash and government debt, are a $300 billion corner of the crypto market, according to a report. RWA.xyz. Meanwhile, tokenized US Treasuries are dwarfed by tokenized equities, at around $9 billion and $681 million respectively.

Currently, Securitize is among the players bringing tokenization to Wall Street, after helping to issue BlackRock’s USD Institutional Digital Liquidity Fund (or BUIDL). The money market fund, which consists of several blockchains, has become a $2 billion product since its debut last March.

In an article published in The Economist on Monday, BlackRock CEO Larry Fink and COO Rob Goldstein marked the potential of tokenization to “vastly expand the world of investable assets.” They described the adoption of the technology as remarkable in emerging markets.

Asset classes such as real estate are now dominated by large institutions, but the financial giant’s top executives suggested that “smaller, more accessible units” could broaden access.