There long has been talk about the tokenization of real world assets (RWA). This falls under what I consider to be the tokenization of everything.
Europe got ahead of the rest of the world by providing regulatory framework for which companies could bring these to market. Robinhood is one platform that decided to take advantage.
We are likely going to see this approved in many parts of the world. So far, the Europeans have access to it. That said, Galaxy Digital is in the process of tokenizing its own stock, offering this to customers in the United States.
It is a piecemeal process but one that is likely to accelerate. In fact, we see this with Robinhood based upon their recent activity.
The Tokenization of Real World Assets Is Underway
Many entities have started down this path. If we think about it for a second, there are millions of different assets which could see tokenization.
Some of the different types of financial products are:
- stocks
- real estate
- commodities
- risk
- bonds (debt)
- private equity
Each of these offers a multitude of options.
Blackrock is one company that experimented with the tokenization of bond funds. These are, for the moment, only available to other institutions. Again, regulation uncertainty (in the United States) stands in the way.
Robinhood is focusing upon the European market since that is where it is legal. The company got an early jump and is now accelerating its offering.
Robinhood has expanded its tokenization initiative on the Arbitrum blockchain, deploying 80 new stock tokens in the past few days and bringing the total number of tokenized assets close to 500.
Without looking at the list, I would surmise this is most of the stocks contained in the S&P 500.
According to data from Dune Analytics, Robinhood has tokenized 493 assets with a total value exceeding $8.5 million. Cumulative mint volume has surpassed $19.3 million, offset by around $11.5 million in burning activity, signaling a growing but actively traded market.
Obviously, these numbers are far smaller than what the traditional exchanges do in volume. However, this is just the beginning. We have to keep in mind most customers are excluded, including citizens of the United States.
Stocks are not the only focus. We see other assets being tokenized.
Stocks account for nearly 70% of all deployed tokens, followed by exchange-traded funds (ETFs) at about 24%, with smaller allocations to commodities, crypto ETFs and US Treasurys.
The latest batch of tokenized assets includes Galaxy (GLXY), Webull (BULL), and Synopsys (SNPS), research analyst Tom Wan said. “Robinhood EU users now have a wider range of US Stocks, Equities, and ETFs, thanks to Tokenization,” he noted.
Opportunity For DEX
When we see the opportunity presented, this opens up the door for decentralized exchanges (DEX). Those such as Leodex could really make an impact by catering to this market.
Derivatives are already the largest segment of the financial world. Whereas real estate has an estimated total of $300 trillion, some speculate the derivatives market alone tops $1 quadrillion. Even if it is half of that, we see something that is more than 2/3 larger than the entire global real estate market.
Tokenization is the opportunity to create derivatives tied to other assets. This means that decentralized entities could simply produce those assets on a chain like Ethereum and roll them out to the public. Naturally, there will be some form of pegging required.
This is one of the upcoming areas of focus for Leodex. Others will likely follow.
What we are seeing is the decentralization of asset availability. Consider how much of the global population lacks access to the US equities markets. These people could not by Meta, Google, or Apple stock. It is a major setback for much of the world.
Tokenization is the opportunity to get involved. Those who are acquiring capital via crypto could ultimately roll this value into tokenized stocks (or other assets).
Eventually, my view is the crypto market will move into the quadrillions. It is likely this becomes a multiple as the effects of tokenization skyrocket. This will be coupled with the advancement of AI, generating even greater economic output.
RWA can turn into a quadrillion dollars in tokens simply with what already exists. We can expect innovation and creativity to bring more products to market.