Title: Wall Street's Exploration of DeFi and Tokenization: How Far Will They Go?
Author: Vince Dioquino
Translation: Plain Blockchain
Key Points:
The "gray area" of DeFi poses a challenge to Wall Street's traditional regulatory framework.
BlackRock and Franklin Templeton are leading in the blockchain government securities field.
1. Current Development
Top talents on Wall Street are fully committed to tokenizing real-world assets, but they are at a crossroads: should they proceed cautiously or venture into the wild west of cryptocurrencies?
The financial world is undergoing a blockchain transformation, with Wall Street at the forefront of digitizing traditional assets. However, as banks and asset management companies venture further into this new field, they face a difficult choice: to stick to the familiar safe and controlled environment or to venture into the unknown wilderness of decentralized finance (DeFi).
For the uninitiated, DeFi is like the autopilot financial service in the crypto world. It consists of a series of projects running on the blockchain, offering lending, trading, and other "Lego-like" services without any central authority at the helm. Sounds cool, right? But it's also a regulatory minefield that makes traditional finance professionals extremely uneasy.
Steven Hu, digital assets expert at Standard Chartered Bank, bluntly stated that for banks, fully decentralized tokenization is neither "realistic nor ideal." They need a controller to ensure everything is legal and compliant.
"There needs to be a centralized authority to ensure the authenticity, uniqueness, and proper use of the underlying assets," Hu said.
2. Tokenization Could Reach $30 Trillion in Ten Years
Interestingly, according to Standard Chartered Bank's forecast, the tokenization market could reach a staggering $30 trillion by 2034. Currently, we see around $13.2 billion of real-world assets tokenized, with private credit leading at $8.4 billion, followed by U.S. government bonds.
When it comes to government bonds, some major players have made waves. BlackRock and Franklin Templeton have launched government securities funds running on the blockchain. Through their BUIDL and BENJI Tokens, they have attracted nearly $1 billion in assets.
While some on Wall Street are cautious in private blockchains, crypto enthusiasts are betting big on public networks. Nana Murugesan of Matter Labs is confident that real action will unfold on public networks.
Franklin Templeton has grand ambitions for its BENJI Tokens. They hope these digital assets will eventually trade across the entire crypto ecosystem. Their digital assets head, Roger Bayston, is even discussing with regulators how stablecoins can operate in the DeFi space with everyone following the rules.
BlackRock is also not sitting idle. Since March, its digital currency market fund has raised $527 million. Carlos Domingo of Securitize Markets attributes its success to the fund being usable on Ethereum and allowing people to cash out quickly.
3. DeFi Is the Wild West, and Cowboys Are Few (for Now)
So, why is all this important? Jeremy Ng of OpenEden puts it this way: "DeFi is the horse pulling the carriage of tokenized real-world assets (RWA)." In other words, without these wild on-chain activities, no one would care about tokenizing those mundane traditional assets.
Even regulators are starting to show interest. The financial regulator in Singapore has allowed 24 major banks to experiment with tokenization in its sandbox. Meanwhile, Goldman Sachs is conducting bond-related operations on its private blockchain.
The million-dollar (or trillion-dollar) question is whether Wall Street will fully embrace DeFi or keep its distance. Bayston of Franklin Templeton believes that everyone will eventually realize the huge potential of public blockchains in improving market efficiency.
The boundary between the traditional banking world and the new world of cryptocurrencies is becoming increasingly blurred, almost like cracks in the matrix. Whether this is exciting or frightening may depend on where you stand on Wall Street.
Original article link: https://www.hellobtc.com/kp/du/07/5321.html
Source: https://cryptobriefing.com/wall-street-defi-tokenization/
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