Tokenized Real-World Assets (Excluding Stablecoins) Market Value Hits Over $12B: Binance Research

As an analyst with over two decades of experience in traditional finance and blockchain technology, I find myself increasingly impressed by the growth trajectory of tokenized real-world assets (RWAs). The surge in the market value of RWAs to over $12 billion is a testament to the growing investor interest in this space.

The worth of non-stablecoin, on-chain real-world assets keeps climbing, indicating sustained investor enthusiasm for the tokenization of conventional assets using blockchain technology.

At present, the combined value of all RWAs exceeds an unprecedented 12 billion dollars, as per a report released by Binance Research last Friday. It’s important to note that this figure does not include the thriving stablecoin market valued at approximately 175 billion dollars.

Breaking down Real Asset Work Units (RWUs) such as real estate, government bonds, stocks, and even intangible items like carbon credits into smaller, tradable units enables smoother trading for investors. This way, they can acquire these assets in portions, fostering transparent records and enhancing the efficiency of the settlement process.

For over a year, tokenization has been touted as a trillion-dollar opportunity, accelerating traditional finance’s transition to blockchain rails. Bigwigs from Wall Street, like BlackRock (BLK) and Fidelity, have successfully forayed into RWAs alongside several crypto-native projects such as Securitize and Polymath.

The digital versions of U.S. Treasury notes, known as tokenized treasury funds, have amassed a market value exceeding $2.2 billion. Among these, BlackRock’s BUILD holds close to $520 million, making it the largest digital Treasury product. Franklin Templeton’s FBOXX follows closely with a market cap of $434 million, ranking as the second-largest tokenized Treasury product.

As a researcher, I’ve noticed that the surge in U.S. interest rates has served as a significant catalyst, fueling the swift expansion and dominance of the market for tokenized Treasuries, based on my findings from Binance Research.

Analysts at Binance Research believe that this growth may have been influenced by U.S. interest rates reaching a 23-year peak, keeping the federal funds target rate constant at 5.25%-5.5% since July 2023. This has made U.S. Treasuries, backed by the government, an appealing investment option for numerous investors due to their high yields.

In the upcoming months, it’s anticipated that the Federal Reserve will lower interest rates. This could lessen the allure of investments offering returns, such as tokenized U.S. Treasury bonds. The central bank may announce its initial rate reduction as early as next week.

According to Binance Research findings, substantial decreases in rates could potentially lessen the significant desire for tokenized government bonds.

Analysts have pointed out that given current high rates, both the magnitude and frequency of any potential rate reductions will be significant. Right now, the primary digital Treasury offerings provide returns ranging from 4.5% to 5.5%, which means several reductions would be needed before these yields start losing their appeal.

Binance Research examined areas such as on-chain private credit, tokenized commodities, and real estate. According to their report, the value of the on-chain credit market was approximately $9 billion, accounting for only about 0.4% of the traditional private credit market, which was projected to be worth around $2.1 trillion in 2023.

In addition to Figure, a fintech firm specializing in lines of credit backed by home equity, dominates the majority of the market capitalization in the on-chain private credit sector. Nevertheless, when disregarding Figure, this segment has continued to witness growth in terms of active loans. This expansion is primarily driven by Centrifuge, Maple, and Goldfinch.