Recently, some forecasts for Real World Assets (RWA) in 2024 have been revealed. In particular, the tokenized finance landscape has experienced significant development in the current year.
For 2024, Collin Erickson and Mac Naggar from the research team at RWA.xyz foresee growth in new directions. What are the main challenges and opportunities awaiting RWA builders in the coming year? Let’s see all the details.
Growth forecasts in the world of Tokenized Assets (RWA) by 2024
Regarding stablecoins, the report shows that, as of December 14, 2023, the combined circulation of Circle (USDC) and Tether (USDT), the main stablecoins pegged to the USD, amounts to 115 billion dollars.
Given the remarkable adaptability of these tokens to the market, it is expected that numerous teams will try to replicate their success in 2024.
To challenge the current market dominance of USDC and USDT, these teams will focus on key differentiations.
In particular, it is expected that they will use alternative forms of collateral to support stablecoins, such as currencies, commodities, or public debt; they will offer additional incentives to users, perhaps by sharing the returns generated by the collateral.
Finally, they will introduce new compliance frameworks, such as the creation of a “blacklist” or the prohibition of certain crypto activities for wallets with specific user characteristics.
Despite the expected proliferation of new stablecoins, a significant reduction in the market share of USDC and USDT is not foreseen by 2024.
Newcomers will have difficulty competing with the extensive interoperability, established network effects, and “blue-chip” status of USDC and USDT.
The tokenization of assets, on the other hand, allowing fractional ownership, programmable functionality, and advanced traceability, presents new investment opportunities.
In 2024, we expect broadcasters to increasingly introduce tokenized alternative assets to the market, attracting investors seeking a diversified and uncorrelated stream of operations.
The sectors that are likely to generate the most interest in 2024 include intellectual property rights (such as royalties and licenses) and potentially other assets such as carbon credits or commercial financing credits.
Tokenized assets and regulation
Once considered a novelty, the idea of connecting asset creators to sources of capital through blockchain has lost its uniqueness.
The RWA.xyz Directory, in fact, identifies at least 40 tokenization protocols capable of facilitating on-chain private credit transactions.
Historically, many of these have focused on creating a borrower pipeline, without clearly matching the demand from buyers.
Kevin Miao from BlockTower Credit highlighted that BlockTower has been a pioneer in building an RWA strategy based on the needs of capital providers, achieving success with MakerDAO which has invested $1.35 billion in BlockTower Credit through various investment vehicles.
Taking inspiration from this success, it is believed that platforms will prioritize the needs of capital providers over those of asset originators. The challenge will be to ensure that capital providers are sufficiently robust.
The first regulations of cryptocurrencies emerged in response to the ICO boom of 2017-2018. Regulatory authorities worldwide have developed new ad hoc regulatory frameworks to govern crypto-assets.
Initially, tokenized assets were in a regulatory gray area, but in 2023, regulatory authorities from various jurisdictions, including Singapore, the United Kingdom, Japan, Abu Dhabi, Hong Kong, and Luxembourg, provided guidance on tokenization.
In 2024, it is expected that this trend will continue, with regulation following the development of tokenized asset markets, which will represent a more diversified set of asset rights.
Sustained growth of tokenization in the financial institutions sector
As we know, a series of news in 2023 highlighted that many multinational financial institutions have launched tokenization products. This highlights a growing institutional interest in blockchain technology.
It is therefore expected that this trend will continue in 2024.
It is plausible that institutional fund managers feel a sense of urgency in considering tokenization, perhaps driven by the desire to keep up with industry pioneers.
2024 could very well be the year in which a significant growth in the issuance of digital bonds will be recorded, if not in terms of volume, certainly in terms of quantity.