State of the Tokenization Industry | 2024
The Year of the RWA
Security Token Market is proud to release a comprehensive report highlighting developments across 350+ RWA firms and issuers throughout 2024. These come from tokenization platforms, marketplaces and brokers, institutional activity, blockchain protocols, fund tokenizations, private companies and public equities issuances, bonds and debt, credit and lending, real estate, alternatives assets, precious metals, DeFi platforms, global regulation and legislation, custody, infrastructure providers, stabelcoins, deposit tokens, and CBDCs and even third-party research reports. Real world assets are coming on-chain at faster speeds now more than ever across institutional and retail use cases alike. Learn more in the abstract.
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The State of the Tokenization Industry 2024 report is made possible thanks to SteelWave Digital. SWD is the digital arm of SteelWave, a San Mateo-based, successful institutional real estate firm with decades of experience and a transaction history in the size of multiple billions for commercial real estate. SWD was formed as a subsidiary dedicated to digitization and innovation of SteelWave real estate and capital market activities. This venture does not replace their traditional deal structures — but offers a new universe of deal capitalization adding to and complementing their existing capabilities. SWD announced in May of this year that a $500 Million SteelWave fund will be using the blockchain to offer a token for exposure to the fund backed by commercial real estate. Both the size of this offer and the track record of the issuer speaks volumes to where the real estate tokenization industry has come today.
Abstract
Since the industry’s inception in 2017, each year seemed like a fresh year that could lead to the year of the security token. Now, 7 years later, 2024 has proven to be the year of the Real World Asset (RWA). RWAs have expanded the definition to cover any physical asset that can be tokenized excluding crypto assets such as Bitcoin, Ethereum and similar. Some even include stablecoins in this mix, which have grown to a size that warrants recognizing the legitimate use case of RWAs. Now, the return of the adage that hundreds of trillions of dollars worth of RWAs are on the table to tokenize is here with a brand new force of momentum.
Older narratives like real estate and private credit fund tokenization continue to grow organically. Though billions of dollars worth of these products are being issued and placed, the attention this year has gone to a category that saw immense growth in 2024. The prior year, numerous funds for US treasuries, money market funds, and similar liquidity products started to gain traction. That traction went superbolic when the largest asset manager in the world announced $BUIDL. The BlackRock USD Institutional Digital Liquidity Fund launched in March and quickly became the largest tokenized fund in the world, with over $500M in AUM as of the end of July 2024. Since then, the category has surpassed over $1 Billion in size with no signs of stopping as numerous institutions and DeFi startups enter the race. These liquidity products are being used to create settlement tools/ pairs, to diversify DAO treasuries, and for posting margin with prime brokers.
Another category that has resurfaced since the collapse of FTX is tokenized stocks, which were trading to tunes of millions before being shut down. Now, Backed, Dinari, Swarm and other platforms are bringing popular US public equities like Nvidia, Tesla, Apple, and others in tokenized fashion. Will we see the same level of activity return with many of these companies promising to bridge these assets to DeFi?
Europe is poised for significant growth as ESMA regulated marketplaces come to market while the tokenization industry adopts MICA rules. Switzerland’s DLT Act and the UK’s pro-tokenization regulators also are attracting significant activity from institutions and DeFi alike. The Middle-East and Asian hubs like Singapore, Japan, and Hong Kong are also thriving under friendly guidance and clarity for issuing tokenized assets and will soon graduate to full-blown ecosystems built and designed for an on-chain capital markets infrastructure.
Finally, blockchain protocols have fully embraced the RWA narrative, recognizing and communicating to their community the importance of the technology. The opportunity to warehouse the data for hundreds of trillions of equities, bonds, real estate and more presents a universal excitement due to the potential to provide competitive utility for their respective chains. DeFi applications have also seen renewed interest to tap into this newfound yield and value. This new evolution to the tokenization narrative has made its way mainstream which will lead to new innovation and capabilities for RWAs being developed while institutions are publicly announcing their plans to improve their existing processes and business lines.
This all makes for a breakthrough year for the tokenization industry. The level of activity globally has reached a critical mass moving the industry past a tipping point. Tokenization has reached a product-market-fit that will continue to see a mass migration from TradFi while simultaneously converting crypto natives to RWA supporters.
