Avalanche has highlighted that there is a growing interest in tokenization. This is for several reasons, most of them pertaining to tokenization finally being accepted as the next-generation technology and tokenized assets displaying a class of novel utility. The majority of the adoption is driven to upgrade legacy infrastructure, boost global finance, and upgrade institutional workflows.
Institutions have cultivated tokenization to meet their needs. This can be categorized as follows:
- Tokenization of cash & cash equivalents
- Tokenization of alternative assets
- Native onchain asset issuance
Tokenization of cash and cash equivalents includes initiatives that are directed to CBDCs, tokenized deposits, and enterprise stablecoins. The benefits that these offer pertain to convenience in cross-border transactions, conversions of currency, and facilitating peer-to-peer transfers. Also, they boost tokenized asset payments and remittances.
Ventures like Backed and Franklin Templeton have attempted to tokenize the US money market for yield generation, reserve diversification, and making B2B payments.
Alternative assets are often referred to as alts. There is a focus on the tokenization of alts for two reasons: it is a massively growing asset class, and there is growth in the accredited and affluent investor market.
This phenomenon transcends the borders of the United States. Instead, it goes beyond regional borders, all of which are underallocated to alternative assets (alts). In 2023, institutions recognized a potential opportunity and spearheaded the segment’s initiatives. As an example, Hamilton Lane used the idea of providing tokenized feeder funds with more private equity and credit options. Others to have followed the trend are JP Morgan and Apollo Global. Both of them have debuted their respective pilot platforms based on blockchain, registered under Project Guardian by MAS, the Monetary Authority of Singapore.
Native onchain asset issuance presents the possibility of having legal ownership plus other rights and benefits in the token. It further brings the possibility of automating those components of the process that have historically been manual. This includes the removal or continuation of third-party intermediaries and service providers.
Moreover, native onchain asset issuance has been linked to bringing down the cost of capital with administrative fees. Avalanche concluded its report by saying that the industry is indeed moving forward, adding that re-architecting the legacy infrastructure is going to take time. Avalanche has suggested everyone study how financial institutions take a business-first approach to their efforts in blockchain.
That said, AVAX, the native token of Avalanche, is down by 3.27% in the last 24 hours. It is currently exchanging hands at $33.23. While this number is up by 9.99% in the last 7 days, it has fallen by 16.19% in the last 30 days. The market cap and 24-hour volume are down by 3.18% and 5.99% in the same order at the time of articulating this piece.
Moving forward, the community may want to study the manner in which legacy infrastructure is being upgraded and how finance is taking off with innovation.