July 25, 2025

 

(DIGGING INTO TOKENIZATION)

 

July 25, 2025

 

Hello everyone

 

What is Tokenization?

“Tokenization” refers to the process of turning financial assets – such as bank deposits, stocks, bonds, funds, and even real estate – into crypto assets.

In other words, the process creates a record on a digital ledger blockchain that represents the original asset.

These blockchain-based assets, or “tokens”, can be held in crypto wallets and traded on blockchain, just like cryptocurrencies.

 

Stablecoins

Stablecoins can be seen as an example of tokenization.  They are a type of cryptocurrency designed to maintain a constant value by being pegged to a real-world currency, typically the U.S. dollar.  The issuer holds one U.S. dollar in reserve for every dollar-pegged crypto token it creates.

Stablecoins are blockchain-based tokens acting as a proxy for an asset that already exists outside the blockchain.

They allow people to move money across borders without interacting with the banking system.  While critics say that this makes them useful for criminals who want to avoid banks’ anti-money laundering checks, stablecoin issuers say that they are a lifeline for people in countries without a developed payments system.

 

How big is this market?

The Stablecoin market has grown to an estimated value of $256 billion, according to crypto data provider CoinMarketCap, and is expected to touch $2 trillion by 2028, according to Standard Chartered.

 

Pros of Tokenisation

1/ Improves liquidity in the financial system. Illiquid assets like real estate could be traded more easily if they were broken up into small digital tokens.

2/ Improves access to asset classes that are typically out of reach of smaller investors by creating a cheaper entry point.

Bank of America and Citi have said they could explore launching tokenized assets, including stablecoins.

BlackRock’s aim is to become the largest cryptocurrency manager in the world by 2030.

 

Risks

There has been a lot of hype around tokenization.  The rapidly growing ecosystem could experience near-term turbulence due to the potential risk of a big decline in prices.

European Central Bank President Christine Lagarde has warned stablecoins pose risks for monetary policy and financial stability.

There appears to be a lack of stringent regulation, so the frenzy around the new technology could introduce new system risks.

More than half of the world’s U.S dollar stablecoins are issued by a single company, Tether, which says it manages $160 billion in reserves, but has not undergone a financial audit.

 

QI CORNER

Charles Henry-Monchau

(Chief Investment Officer @ Syz Group)

 

 

SOMETHING TO THINK ABOUT

 

 

 

Cheers

Jacquie