The asset tokenization and real-world asset (RWA) space caught the eye of retail and institutional capital investors in 2023 for its favorable blend of professionally-managed products and digital asset mechanics. Having advised 40-plus clients on tokenization strategies and issuances to date,we see the following key themes emerging in these markets in Q3 2023.
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Blockchain Savings and Bottom-Line Improvements
For investors entering this space, the greatest efficiencies will come through end-to-end digital systems – meaning an on-chain lifecycle. That means savings in dollars or manual labor time relative to traditional processes. For example:
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Goldman Sachs Digital Asset Platform (GS DAP) achieved 15 basis points in savings for its €100M digital bond issuance, resulting in €150K of added return passed onto Union Investment as the sole buyer.
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J.P. Morgan’s Onyx Digital Assets (ODA) is projecting $20 million in savings on an expected $1 trillion in tokenized repo volume by the end of 2023.
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Broadridge’s Distributed Ledger Repo (DLR) is saving sell-side clients like Societe Generale $1 million per 100,000 repo transactions.
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Equilend launched 1Source as a distributed ledger-based securities lending solution to save the securities lending industry an estimated $100 million in collective costs.
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Structured finance servicing platform Intain reports 100 basis points in savings by reducing SME loan lifecycle fees from 150 bps to 50 bps through Hyperledger and Avalanche blockchain solutions.
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Vanguard is leveraging R3’s Corda through Grow Inc. to achieve straight-through processing saving 100 hours a week in labor.
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Liquid Mortgage has reduced Mortgage-Backed Securities (MBS) reporting from 55 days to 30 minutes on the Stellar blockchain.
Money Markets and Treasuries as the Low-Hanging Fruit
Asset managers and issuers are familiarizing themselves with tokenization workflows by trialing money market and treasury products. These tokenized assets generate a yield that can be passed on to clients, fully on-chain.
While alternative product strategies, like Hamilton Lane’s digitally-native private equity share classes, are in the works, money markets yield ~5% annually in low risk segments. This asset class accumulated almost $700 million in on-chain capital by the end of Q3 2023, up almost 520% YTD.
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- Source: https://www.fintechnews.org/tokenization-and-real-world-assets-take-center-stage/
