Developing Economies to Drive the RWA Tokenization Train by 2026: Crypto Exec

The tokenized real world asset (RWA) market will continue to grow in 2026, with adoption in emerging market economies, according to Jesse Knutson, head of operations at crypto exchange Bitfinex.

Emerging market economies face a “conflict” in capital formation and attracting foreign investment, Knutson told Cointelegraph.

He said the process of representing physical or traditional assets on blockchain networks, simulating real-world assets, would enable this onchain capital formation and bypass traditional financial intermediaries. Kunston added:

Emerging markets also tend to leapfrog the infrastructure that holds back developed markets, including stable sine deployment, faster than markets with established pipelines.

Tokenization allows for fractionalization of assets, democratizing investments that can be cost-prohibitive for the average retail investor, Knutson said.

He added that companies that can provide fixed returns to investors but cannot access traditional financing are the biggest beneficiaries of asset tokens.

Fixed income instruments, including US Treasuries and money market funds, are the most popular assets in developed economies for tokenization, while real estate and commodity trading are the most popular use cases in developing economies, he said.

Knutson predicts that RWA's total market capitalization will grow to several trillion dollars over the next decade, but that growth will depend on major issuers moving from pilot programs and sandboxes to actual commercial products.

Related: Tokenization Will Disrupt Finance Faster Than Digital Corrupt Media: Crypto exec

The introduction of traditional financial assets onchain still has several key challenges

Despite the positive outlook for the future of the RWA market, several challenges remain, including the legal enforceability of onchain contracts, ensuring adequate liquidity without slippage and creating investor protection frameworks, Kntsen said.

He told Cointelegraph that creating a consistent level of communication between different blockchain networks and platforms where tokenized assets are issued is also a key challenge to overcome in order to achieve mass adoption.

Different levels of tokenization and differences between permissioned blockchains and permissionless crypto ecosystems create technical challenges for RWA issuers.

To realize the full potential of onchain assets, providers must create tokenized products that can be transferred across the various crypto-ecosystems and used as collateral in decentralized finance (DeFi) applications.

Magazine: Stablecoins By 2025, you will see explosive growth as the world adopts the asset class.