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Actualising US$16 tril real-world asset tokenisation a long but 'noble' process

Nicole Lim
Nicole Lim • 6 min read
Actualising US$16 tril real-world asset tokenisation a long but 'noble' process
Mori of Credit Saison’s global business arm sees real-world assets as the future of finance. Photo: Saison International
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On April 26, close to 400 investors, entrepreneurs and technologists from around the world gathered at a ballroom in central Bangkok after a week full of fintech and blockchain events to attend OnChain 2024, Asia’s first real-world asset (RWA) conference.

The inaugural one-day event, organised by Saison International, was more than doubly oversubscribed. Attendees hovered outside the main ballroom as keynote speeches took place, a sign of renewed optimism in the web3 industry, unfazed by the volatility that marks this space.

Web3 or Web 3.0 is the latest iteration of the World Wide Web incorporating concepts such as decentralised finance (DeFi), blockchain technologies and token-based economics.  

“We are no strangers to the prices of digital assets dramatically declining or the slowdown in fintech funding, but all seasons come to an end, and today here in Bangkok, it already feels a lot warmer,” said Kosuke Mori, CEO of Saison International at his opening address at OnChain 2024.

Saison International, the global business arm of the 73-year-old Japanese lending conglomerate Credit Saison, has long been keeping an eye on emerging ideas. Real-world assets, the tokenisation of tangible assets that exist in the physical world and are brought onto the blockchain, is an area that can very much be the future of finance, says Mori.

A 2022 Boston Consulting Group report finds that asset tokenisation as a business opportunity will grow to US$16 trillion ($40.55 trillion) by 2030. Mori describes the forecast as “particularly exciting” because it is the first one the industry is seeing involving RWAs as an emerging trend.

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Credit Saison began its web3 investment journey through its venture capital arm, Saison Capital, which was founded in 2019. Two years ago, Saison Capital started deploying capital into various web3 start-ups — gaming, decentralised finance and RWA companies. So far, it has invested in eight RWA startups across different verticals, from tokenised private credit to stablecoin.

Looi: Blockchain presents itself as a radical but new way of changing how the financial world works. Photo: Saison International

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“One of the biggest areas that we identified as a huge opportunity is the intersection of fintech and blockchain,” says Looi Qin En, partner at Saison Capital. “We’ve seen billions of dollars poured into fintech but the way money moves still hasn’t changed. We are still reliant on networks that have been around for decades, which are expensive.”

He adds that blockchain presents itself nicely as a radical but new way of changing how the financial world works.

Decade-old concept 

To be sure, the tokenisation of assets is already a decade-old concept that has been slow to take off due to the complexities around technology and the limitations around current infrastructure and interoperability. It has its share of regulatory and compliance challenges, particularly while operating within the legacy financial market infrastructure.

At a panel titled “The role of regulation and insurance in safeguarding RWA” at OnChain 2024, panellists debated regulatory challenges, including those from the Prime Minister’s Office in Thailand and members of the digital asset ecosystem.

“Depending on the country and also the regulator’s mandate, there are some asset classes that are probably easier to move to these new tokenised formats,” says Bruno Batavia, director of emerging tech at investment firm Valor Capital Group. Batavia was formally an official at the Brazilian central bank.

In RWAs, one does not work in a single jurisdiction but on a global playing field, notes Narun Popattanachai, senior legal counsel at the Office of the Council of State Thailand. “Legal and regulatory asset cuts in so many ways,” he adds.

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For example, tokenising a piece of land, compared to yachts in Thailand, is done through two different systems. Although they are both pieces of real estate, land belongs to the government, while a yacht belongs to a sole owner.

But some assets which have been simpler to tokenise have seen “big traction”, according to Eli Cohen, general counsel at Centrifuge. Cohen refers to tokenised treasuries, which he says have grown in popularity after the biggest crypto scandals of 2021 and 2022 taught investors better risk management.

But how viable is the path to actualising the US$16 trillion RWA market?

Case study of a pioneer 

Just ask Henry Zhang, who had spent decades in the traditional financial world with Citibank, Standard Chartered Bank and East West Bank before founding DigiFT, a decentralised exchange for on-chain real-world assets, in 2020.

Zhang of DigiFT: It’ll take another two to three years before the exchange can start to be profitable. Photo: DigiFT

DigiFT is built on the Ethereum blockchain and offers secondary trading liquidity for security and web3 tokens, facilitated by an automatic market-making mechanism. Last December, it became the first decentralised exchange for on-chain RWAs to receive a capital markets licence from the Monetary Authority of Singapore (MAS) as a recognised market operator.

In simple terms, the DeFi exchange allows for the simultaneous clearing and settlement of financial assets without the help of intermediaries. Because information is stored on the blockchain, clients of DigiFT can keep their assets in a self-custodised wallet.

Over 10 tokens are listed on the exchange. These include tokenised RWAs backed by US treasuries, money market funds, equities and digital assets such as certain cryptocurrencies. Zhang offers these assets on his platform in two ways: Through the direct route, which is not dissimilar to that of a brokerage firm, or through wrapped listings via broker-dealers.

Zhang says that the net return of an investor’s investment into US Treasuries on his platform can command a roughly 5%–5.5% return without intermediaries.

Yet, Zhang says that the traction on the platform has so far been low. Having only launched last December, he declines to divulge the daily transaction volume on the exchange, except to say that “the number is very small”.

This brings into question the viability of an on-chain DeFi exchange such as DigiFT. Zhang admits investor education is lacking. In his view, it will likely take another two to three years for it to become a “big” thing before mainstream adoption takes place and the exchange can start to be profitable.

“The path, practically speaking, will not be short. What we’re doing now is not easy to make quick money,” he says. “We’re selling a noble story [about the future of finance], and we will be commercially viable or even be very commercially successful … but we need to have some belief.”

In March 2023, during the crypto winter, DigiFT raised US$10.5 million to fund its expansion into the Middle East and Europe and its technology development.

The pre-Series A funding round was led by privately-owned Chinese investment firm Shanda Group, HashKey Capital, and Hash Global, a sign of bullish enthusiasm among investors despite the then-market conditions.

Still, the market size of tokenised assets today remains small. “You see so many players sharing just a couple of billions, it’s nothing,” says Zhang. “But on the other hand, you’ve heard that [the market size] will be trillions [in a couple of years], that’s what keeps us very excited and passionate about it.

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