US Must Build Competitive Moat for Tokenized Real-World Assets

The United States is at a critical juncture in the evolving landscape of finance, particularly concerning the tokenization of real-world assets (RWAs). Sergey Nazarov, co-founder of Chainlink, emphasizes the urgent need for the US to establish a competitive moat around these highly secure tokenized assets. In a recent interview with Cointelegraph’s Turner Wright at the Digital Asset Summit in New York, Nazarov articulated the importance of adapting to the new financial paradigm that is characterized by borderless and permissionless finance.

The Global Phenomenon of Blockchain Technology

Nazarov pointed out that blockchain technology is not just a passing trend; it is a global phenomenon that relies on open-source software and distributed technology. This is a significant departure from previous technological shifts that were often confined to specific regions or countries. The executive highlighted that the shift to online commerce, which previously provided the US with a competitive advantage due to its early investment in internet infrastructure, does not hold the same relevance in the current age of digital finance.

Tokenized Real-World Assets: A $100-Trillion Market

According to Nazarov, the market for tokenized real-world assets could balloon to an astonishing $100 trillion in the coming years. This projection is based on the premise that a significant portion of the world’s assets will eventually be brought on-chain. As of now, private credit constitutes the largest segment of the total RWA market capitalization, with over $12.2 billion in tokenized private credit instruments currently available in the market.

Enhancing Liquidity Through Asset Tokenization

One of the most compelling advantages of asset tokenization is its ability to enhance liquidity in previously illiquid asset classes, such as real estate. By tokenizing these assets, the inherent illiquidity discount associated with physical properties can be eliminated. This transformation is not merely theoretical; it is already being realized in various markets around the world.

Case Studies: Real Estate Tokenization

For instance, in February, Polygon CEO Marc Boiron discussed the transformative potential of tokenizing real estate. He noted that this process could fractionalize ownership, eliminate intermediaries, and significantly lower settlement costs. A prime example of this real estate overhaul can be seen in Turkey, where projects like Lumia Towers—a 300-unit mixed-use commercial real estate development—have been successfully tokenized using Polygon’s technology.

Global Trends in Tokenization

Moreover, the trend of tokenization is not limited to Turkey. The United Arab Emirates (UAE) is emerging as one of the hottest property markets globally, with proactive digital asset regulations in place. Institutional investors and developers are increasingly turning to tokenization as an alternative method of capital formation, further solidifying the need for the US to remain competitive in this rapidly evolving landscape.

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In conclusion, the US must act swiftly to build a competitive moat around tokenized real-world assets. As the world moves towards a more decentralized and borderless financial system, the implications for the US economy and its position in the global market are profound. The insights shared by Sergey Nazarov serve as a clarion call for policymakers, investors, and industry leaders to recognize the urgency of this matter and take proactive steps to ensure that the US remains a leader in the age of digital finance.