In his paper Next-Generation Securitization: NFTs, Tokenization, and the Monetization of ‘Things’ Prof Steven L. Schwarcz reported that For decades, businesses have used securitization to monetize assets by selling to investors interests in the assets’ future value. Traditionally, securitization has monetized so-called financial assets, which generate cash flow to pay the investors. That payment source, coupled with the ability of investors to resell their interests, can create a highly liquid and attractive investment. Even so, securities laws generally restrict these investments to sophisticated and institutional investors. In recent years, securitization has spawned a new generation of transactions that monetize non-financial assets and other rights that do not ordinarily generate cash flow, such as art, collectible cars, access to basketball video highlights, prestigious real estate, and even fictitious real estate used in video games. Industry observers variously use the terms “tokenization” and non-fungible tokens, or “NFTs,” to refer to these non-cash-flow monetization transactions. Rating agency Moody’s and others believe that these transactions have “transformative potential,” including the prospect of creating greater financial inclusion.

Tokenization typically refers, in industry terms, to the monetization of high-value non-financial assets, like fine art, collectible cars, rare books, and prestigious real estate, by creating, and issuing to investors, interests in high-value non-financial assets. Today’s reality provides the potential to structure investments, such as VC funds, with certain specific conditions. This is expected to bring about a vast new inflow of funds, which can be leveraged through the building blocks provided by DeFi.

As the narrative for on-chain real-world assets grows, so does the number of teams working in the space. Asset tokenization, or the process of issuing security tokens representing real tradeable assets, has long been viewed as a viable use case for blockchain technology. A recent BCG study demonstrates the importance of the emergence of a new market cycle driven by asset tokenization, representing a market opportunity of $16 Trillion, potentially opening up a total addressable market of $68 Trillion by 2030.

A new initiative called Tokenise Europe 2025 is being spearheaded by the European Commission (EC) and the German Banking Association to tap into the potential of asset tokenization and distributed ledger technology (DLT) to strengthen the bloc’s competitiveness and build long-term economic resilience. Consulting company Roland Berger suggests in its report that “Tokenisation has the potential to become the backbone of Europe’s economy in an even more digital world. It will be a key driver for change in many areas like the industry by merging supply chains, finance, and logistics into a single seamless process, the financial sector by allowing new forms of financing, asset allocation, and processing, the private life as well as the public sector.”
Decentralized finance protocols could attract institutional interest if they get securitization right, according to S&P Global Ratings.

The integration of real-world assets, or RWAs, into the world of DeFi has been one of the hottest narratives so far in 2023. BlackRock CEO Says ‘Next Generation for Markets’ Is Tokenization

Money never sleeps and Switzerland-based Backed Finance launched a tokenized version of a BlackRock ETF (CSPX) that includes tons of big names like Apple, Microsoft, Amazon, Alphabet, and 496 other large American companies. Meanwhile, german DekaBank plans to launch a tokenization platform by 2024

The cryptocurrency winter, coupled with the pressure of legal and regulatory risk, has presented the financial market with a unique opportunity to drive tokenization under the banking rule. The increasing interest rate will test the sustainability of the stablecoins, thereby paving the way for a payment system t=0 in compliance with Basel IV regulations.