After Stablecoins, Tokenized Assets Will Be The Next Major Institutional Play in Blockchain

Recent institutional interest in stablecoins has been something of a watershed moment for the crypto industry. Not only has the mainstream adoption of stablecoins signalled a renewed interest in and a broader acceptance of blockchain, but it is the first sign of the convergence of decentralised finance (DeFi) and traditional finance (TradFi).

Major institutions such as JPMorgan, Goldman Sachs, and BlackRock have begun integrating stablecoins into their operations. These TradFi heavyweights are utilising stablecoins for transactions, settlements, and as intermediaries bridging TradFi with DeFi. No other blockchain innovation has been adopted by traditional finance players to this extent, underscoring stablecoins’ legitimacy as a bona fide financial instrument.

So what comes next? Which new blockchain creation will capture the attention of TradFi or do stablecoins represent the pinnacle of blockchain’s integration into the mainstream? It would appear that we already have a clear answer to this question: Tokenization.

SEC Roundtable assesses Tokenization

Like stablecoins, tokenization enables new market functions that are unfeasible in the traditional financial system. Tokenization, in the simplest terms, is the process of digitally representing real-world assets, including stocks, bonds, and real estate, on the blockchain in the form of a token, and its applications have already begun to pique the interests of private and public institutions. 

This was no more evident than during the US Securities and Exchange Commission’s (SEC)  public roundtable in May. The event brought together industry leaders, regulatory experts, and academics to discuss the potential of moving traditional assets onto blockchain-based platforms. 

Executives from BlackRock, Apollo, Fidelity, Invesco, to name just a few, emphasised that tokenization is a significant technological advancement, enabling programmable ownership and providing real-time settlements. Such potential benefits make tokenization particularly attractive for institutions seeking improved market dynamics. 

Tokenization is a technological shift

An interesting theme raised at the SEC roundtable is that tokenization should be seen through the lens of a shift as opposed to the creation of entirely new asset classes. Conversations highlighted how tokenization could address various inefficiencies within traditional markets, including costly intermediaries and limited market access - not dissimilar to how stablecoins have overhauled and simplified traditional methods of processing cross-border payments, facilitating greater financial inclusion. 

Additionally, panelists emphasised the transformative potential of tokenization in automating compliance processes through smart contracts. They also noted that tokenization was a greater enabler of fractional investments, reducing the minimum purchase price of historically exclusive asset classes, bringing access to a broader range of investors, and therefore increasing liquidity in these tokenized assets. 

It is clear that tokenization's promise lies in its radical transformation of existing financial infrastructures. By leveraging blockchain's inherent transparency and immutability, tokenization can enhance investor trust and regulatory oversight while reducing systemic inefficiencies,  fundamentally reshaping how assets are traded, settled, and owned in traditional markets.

Challenges facing tokenization

Participants at the SEC roundtable agreed that tokenization offers clear advantages to current market dynamics, but not without drawbacks that must be urgently addressed to enable the kind of institutional adoption seen with stablecoins. Issues such as custody arrangements and the need for regulatory clarity emerged as critical factors.

Fortunately, we’re beginning to see Web3 companies that have built tokenization platforms actively address many of the concerns raised by SEC panellists. Standard compliance checks such as Know Your Customer (KYC) and other Anti-Money Laundering safeguards are becoming increasingly standardised across the tokenization ecosystem, reinforcing trust among both retail and institutional investors.

Some tokenization organisations have gone a step further in regulatory compliance by securing full Virtual Asset Service Provider (VASP) licenses from central banks in their regions of operation. These legal advancements are helping to create compliant secondary markets for tokenized real-world assets (RWAs), allowing investors to buy, sell and trade property-backed tokens within a safely regulated framework.

Of course, there are still areas that need development if tokenization is to reach the scale of institutional adoption seen with stablecoins. While stablecoins have benefited from growing regulatory attention and standardised frameworks, many jurisdictions still lack clear guidelines on how tokenized securities or property-backed tokens are classified, taxed or traded. Interoperability also remains a challenge, with a need for more tokenization protocols and platforms that can integrate across chains and legacy systems, much like how stablecoins operate across exchanges, wallets and DeFi protocols.

After stablecoins, tokenisation can be the next blockchain hit 

From reading coverage of the SEC Roundtable, it’s clear that institutions recognise the immense potential of tokenization to reshape traditional asset markets - provided regulatory frameworks and technological standards evolve in tandem. Tokenization platforms are already scaling to meet some of these requirements. While certain growing pains still need to be addressed, tokenization is well on its way to becoming the next major institutional opportunity in blockchain technology, with the capacity to redefine the future of financial markets, much like stablecoins have begun to do.