Insights into 7 Real Asset Trends of 2024: Transforming the Financial Sector
A few of the trends that will change the capital markets in the upcoming year are tokenized securities, regenerative finance, physically backed NFTs, decentralized private credit, and DeFi in the environment.
The previous two years have presented us with a distinct set of challenges in the constantly evolving field of finance. The most significant of these was US inflation, which in June 2022 reached an astounding 9.1%, forcing the Federal Reserve to enact a series of drastic (and still ongoing) rate hikes.
Simultaneously, the cryptocurrency sector experienced its own storm, which included the collapse of major projects like Terra/LUNA, Celsius, Voyager, and FTX, as well as a number of supporting banks like Silicon Valley Bank, Silvergate, and Signature.
In the midst of this upheaval, blockchain developers have persisted in their unstoppable progress, and real-world assets (RWA) have become a shining example of creativity and resiliency. Fundamentally, the process of tokenizing real-world assets results in the creation of a blockchain-based investment vehicle that is linked to physical assets, such as vehicles or real estate tokenization. Once an asset’s ownership is verified on-chain, it can be safely stored, fractionated, or traded.
1. The foundation of programmable money are stablecoins.
Stablecoins, the pinnacle of programmable money, are poised to experience transformative growth as federal regulation approaches, radically changing our understanding of what constitutes currency. Two issuers dominate this market in the US: Paxos (which offers solutions branded as Paypal’s PYUSD) and Circle (which issues USDC as a multi-chain solution). Stablecoin development, with a market capitalization of about $125 billion worldwide, is the essential infrastructure layer that will propel the Internet’s value. Stablecoins are poised to transform international payments, remittances, e-commerce, trade finance, and other industries by providing stability and flexibility.
2. Tokenized treasuries: combining decentralized and conventional finance
Tokenized treasuries represent the true intersection of decentralized finance and traditional finance. Tokenization of US Treasury bonds and short-term bank deposits has been led by companies like Franklin Templeton, Ondo, Backed, Maple, Open Eden, and Superstate, as short-term risk-free Treasury yields have increased from near zero in early 2022 to roughly 5.4% in October 2023. As per RWA.xyz, a data token and analytics platform, the market capitalization of this new asset class is currently $700 million. Tokenized Treasury Securities are removing obstacles and providing fresh opportunities for financial inclusion and investment.
3. Private Credit: Using DeFi to Empower SMEs
Small and medium-sized enterprises have long been excluded from the $1 trillion US and $1.7 trillion global private credit market. DeFi lending protocols, such as those offered by Centrifuge, Goldfinch, Credit, Maple, Huma, and others, are revolutionizing the debt capital market by providing unprecedented access to debt capital from traditional, banking, and public markets. private companies that create credit. RWA.xyz, which focuses on particular sectors or regions, projects that the market has about $550 million in active loans at the moment and that this momentum will continue in the upcoming months.
4. Backed NFTs: Transforming Financing for Collectibles
It’s evident that art is very profitable given its yearly global sales of over $65 billion ($30 billion in the US alone). However, the markets for traditional art and collectibles are illiquid and weighed down by excessive commissions (auction houses frequently tack on fees of 15 to 20 percent on inexpensive items). Collectibles (coins, stamps, books, comics, art, toys, and more) are thought to have a $400 billion global market that is also quite illiquid. This industry is served by marketplaces such as eBay and a few smaller custom marketplaces; loan options are typically limited to high-rate pawn shops.
Thankfully, the paradigm is shifting thanks to decentralized protocols like arcade.xyz and 4K. Lending and borrowing against assets like Supreme t-shirts and comics has become possible by bringing physical collectibles to the blockchain. Through these initiatives, lending is made more accessible to collectors worldwide, democratizing the process.
5. Consumer Brand NFTs: Boost Client Interaction
Leading consumer brands are adopting NFTs, including Coca-Cola, Adidas, Nike, and Louis Vuitton. Brands are using blockchain technology to enhance their digital footprints, consumer engagement, and entertainment experiences. Examples of these include Starbucks on Polygon and Amazon’s suspected private blockchain initiatives. By adding gaming and metaverse components, these brands are reshaping the future of consumer interaction, whether on public blockchains (like Starbucks on Polygon) or private blockchains (like there are rumors about Amazon).
6. DeFi in renewable energy and climate finance
Blockchain technology is driving positive change in the $2 billion carbon market, amidst growing ESG concerns. Businesses such as Flowcarbon are utilizing blockchain technology to enhance transparency in this significant market, which has to grow fifteen times by 2030 in order to meet the targets set forth in the Paris Agreement. Encouraging a sustainable future depends on blockchain’s accuracy and transparency at every stage of the carbon lifecycle.
7. Wholesale bank settlements and tokenized deposits: transforming international trade
The way banks handle tokenized deposits and wholesale settlements is changing as a result of blockchain technology. While the US may not need to solve the issue of a central bank digital currency (CBDC) right now, given that private issuers may be subject to federal or state regulation, some banks are experimenting with blockchain technology in tokenized deposits and wholesale transactions for intra- or interbank settlements. The potential of instantaneous cross-border transactions is demonstrated through pilot projects from industry giants such as Citi and JP Morgan Chase. In the upcoming months, this field will keep growing, increasing the effectiveness of global finance.
These RWA trends, which provide answers to enduring problems, mark the beginning of a new era in finance. Its market capitalization may appear low at the moment, but its potential for transformation is enormous. The following are not just trends: tokenized treasuries, consumer brand NFTs, physically-backed NFTs, DeFi in regenerative and climate finance, tokenized deposits/wholesale bank settlements, and stablecoins. These are the cornerstones of a financial future that is more efficient, equitable, and sustainable. Moving closer to 2024, Without a doubt, these innovations will set the standard and present previously unattainable opportunities for both individuals and businesses.
