The tokenization of real assets (RWA) is rapidly growing, however, a new report from Tristero Research emphasizes the risks associated with this approach. This article reviews the key findings of the report.
Overview of Real Asset Tokenization
Tokenization of real assets has significantly increased from $85 million in 2020 to an expected $25 billion by 2025, a 240-fold growth. Experts anticipate this market could reach $16 trillion by 2030.
Risks and Recommendations from Tristero Research
The report states that RWA tokenization products, like structured products and synthetics, could destabilize financial markets. Main concerns revolve around oracles, collateral rules, and weak compliance frameworks, which may lead to an 'on-chain subprime crisis.'
Potential Scenarios and Consequences
Tokenization turns slow-moving assets into high-frequency volatility risks, creating a liquidity paradox. Tristero provides an example scenario involving $5 billion in private loans, which, when defaults arise, could trigger a chain reaction on decentralized platforms.
The Tristero Research report underscores that despite the rapid development of real asset tokenization, risks related to liquidity and market stability require serious attention and analysis.
