The tokenization of RWA is often promoted as one of the most promising market sectors in the crypto space, showing strong performance while weathering broader economic recessions.
Crypto venture firms are very interested, and major governments are exploring their applications. But what if this publicity hype was exaggerated? A bold report by JPMorgan makes precisely this claim.
"The total base of tokenized assets remains quite insignificant. This rather disappointing picture of tokenization reflects that traditional investors do not see a need for it so far. There is also not much evidence of banks or clients moving from traditional bank deposits to tokenized bank deposits on blockchains," stated Nikolaos Panigirtzoglou, a strategist at JPMorgan.
JPMorgan researchers frequently survey sensitive areas in the crypto market. The firm has been heavily invested in the tokenization of RWA, so it makes sense that they would want to assess the market impact. Unfortunately, JPMorgan's conclusions are quite grim.
To be frank, most investments in RWA tokenization come from the crypto industry. TradFi institutions have experimented with the market, but they seem to be losing interest. For example, BlackRock's BUIDL fund lost 600 million dollars in total assets from May to August.
The total market capitalization of the sector is 25 billion dollars, of which 15 billion dollars consists of tokenized private credit in the hands of very few companies.
As noted by Eric Balchunas, a prominent ETF analyst, the entire RWA tokenization market is almost equivalent to the average weekly inflows of US ETFs.
"While I am bullish on BTC/crypto (and stablecoins) ETFs, I am simply not convinced about full tokenization. ETFs are too impressive, the value proposition is just too good. Tokenization has been a thing for a DECADE… and it hasn't even touched ETFs. If Wall St believed that tokenized RWA were the next big thing, we wouldn't see record ETF launches year after year!" stated Eric Balchunas.
Balchunas took this opportunity to dispute some arguments that the tokenization of RWA has its best years ahead. In his opinion, it might be closer to the end.
If these claims are true, there is a potential big impact on the market. After all, the SEC is planning to bring the capital markets of the United States to the blockchain. Could this market data disrupt these plans?
To be fair, these claims could be incorrect or misleading. This report would be more impactful if other TradFi institutions corroborated JPMorgan's statements about the tokenization of RWA. However, the crypto industry should be aware that institutional investment in RWA could decrease even further.
