Carlos Domingo, co-founder and CEO of Securitize, stated that the current wave of asset tokenization is not driven solely by availability. While it is often believed that tokenization traditionally enhances the liquidity of illiquid assets, Domingo challenged this notion, explaining that whether these digital assets represent shares in apartment buildings or tokenized Pokémon cards, they inherit the liquidity issues of their physical counterparts. This means that selling such assets quickly without significant financial loss is not easy.
Domingo further noted that although the evolution of tokenization technology could change this situation in the future, the current focus remains on assets that can improve existing liquidity, such as cash and U.S. Treasury bonds. The market is presently moving away from illiquid assets, with the most successful tokenized assets resembling the U.S. dollar, as evidenced by the growth of stablecoins.
Tokenization is an emerging financial trend that converts traditional assets into digital tokens to broaden investment opportunities and facilitate financial transactions. However, liquidity challenges are hindering its widespread adoption, especially concerning illiquid and complex assets. Experts believe that technological advancements and improved regulations may reduce these barriers over time, but for now, investors prefer assets that offer immediate liquidity.
This situation is significant for investors and financial institutions as it highlights that not every digital asset can escape the limitations of its physical form. Moreover, it underscores the need for further research and development to enhance liquidity in tokenized markets, enabling them to become fully functional and broadly accepted in the future.
Source: binance
