Thomas Daniels
The market for tokenized real-world assets (RWAs), excluding stablecoins, has soared past $12 billion, according to Binance. This surge is largely driven by tokenized U.S. Treasuries, bolstered by significant participation from major financial institutions such as BlackRock and Franklin Templeton, as detailed in a Binance Research report released on September 13.
This total does not account for the $175 billion stablecoin market, which remains separate from RWAs.
Tokenization, the process of dividing traditionally illiquid assets like real estate, government bonds, and commodities into fractional shares, makes these assets accessible to a broader range of investors. It also simplifies processes like record-keeping and settlement, offering a transformative shift in traditional asset trading and management.
According to the report, tokenized U.S. Treasury funds alone now exceed $2.2 billion. BlackRock’s BUILD Treasury product leads the sector with nearly $520 million in assets, followed closely by Franklin Templeton’s FBOXX at $434 million. Remarkably, this growth was achieved within just five months, after the tokenized Treasuries market surpassed $1 billion in March.
U.S. Interest Rates’ Influence
Elevated U.S. interest rates have been a critical driver of the expanding tokenized Treasuries market, providing attractive yields for investors seeking stable returns. However, Binance Research cautions that upcoming rate cuts from the Federal Reserve could dampen the appeal of these yield-bearing assets. Still, the report notes that significant rate reductions would be required to meaningfully impact demand.
Other Segments in the RWA Market
Beyond Treasuries, the Binance Research report also highlights other segments within the tokenized RWA market, including private credit, commodities, and real estate. The tokenized private credit market is currently valued at approximately $9 billion, though it represents just 0.4% of the $2.1 trillion global private credit market in 2023.
The report notes that although the on-chain private credit market is relatively small, it has grown substantially, with active loans increasing by 56% over the past year.
Risks Associated with RWAs
Despite their growth, tokenized RWAs come with inherent risks. Many RWA protocols lean toward centralization due to regulatory requirements, raising concerns about control and transparency. These protocols often depend on off-chain intermediaries for asset custody, adding third-party risk. Furthermore, the operational complexity of these systems can sometimes outweigh the yields they offer, prompting questions about their long-term viability.
Privacy and regulatory compliance are also key challenges. Binance Research points to zero-knowledge technology as a promising solution for balancing regulatory demands with user autonomy in this evolving market.
