Colin Butler, Global Head of Institutional Capital at Polygon Labs, believes that real-world asset tokenization for institutional clients may be the killer application for cryptocurrencies because it dramatically reduces costs and settlement time — becoming increasingly difficult for traditional financial institutions to ignore.
"This technology is a massive disruptor for the entire global financial system," Butler said — before outlining the capital efficiencies and business opportunities for all financial institutions embracing the shift to tokenized assets.
The Polygon executive explained that the cost-cutting benefits enable financial firms to consider new business models that were previously unfeasible due to highly competitive markets and slim margins.
A simple graphic depicting real world asset tokenization. Source: Chainlink.
Butler gave the example of fund managers, who report incredibly tiny margins for their administration business and would benefit from a double-digit reduction in cost. The executive told Cointelegraph:
"It is just a much better form of collateral for the global financial system — Like all the FX trades, all the options, stocks, and bonds. That's why this could be the category killer for crypto—it's a larger addressable market by orders of magnitude than anything else crypto claims to solve."
Butler stressed that financial firms, from small financial institutions to international clearing houses, will benefit from the dramatic reduction in cost and settlement time introduced by tokenized assets such as bonds, United States Treasury bills, and stablecoins.
Related: Chainlink’s Sergey Nazarov predicts asset tokenization will transform Web3
The growth of the tokenized real-world asset market
The Polygon executive previously told Cointelegraph that real-world assets represent a $30 trillion opportunity for investors as the world's assets come onchain. According to Cointelegraph Research, investment into tokenized US Treasury bills alone is projected to surpass $3 billion by the end of 2024.
However, not everyone agrees with Butler's assessment that the tokenized asset market will swell to these levels. Real Vision chief crypto analyst Jamie Coutts believes that the 2030 figure for real-world tokenized assets will be closer to $1.3 trillion.
The analyst also noted that even at these more conservative figures, the real-world asset market would still significantly impact digital asset markets with fresh injections of capital.
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