Transforming physical world assets into “tokens” (cryptocurrency units) might appear quite unusual. In reality, we are witnessing the emergence of a market with immense potential. RWAs, or Real World Assets, represent a groundbreaking revolution that cannot be overlooked under any circumstances.
On July 15, 2021, a remarkably original initiative was introduced by the Swiss bank Sygnum in collaboration with Artemundi, an American fund specializing in art. ” Fillette au béret,” a late work by Pablo Picasso created in 1964, depicting a young girl with a melancholic demeanor, underwent a process known as “tokenization.” But what does this mean? The painting, then appraised at 4 million Swiss francs, was transformed into a crypto-asset, specifically 4,000 tokens (units) called AST. Hence, it became a RWA or Real World Asset.
Each purchaser of an AST thus became a partial owner of the ” Fillette au béret” painting, which is precisely where the appeal of RWAs lies. Each ownership certificate is confirmed by a record on a blockchain, an immutable digital ledger, as it is shared among all AST holders.
At first glance, such a venture might seem quite perplexing. Any individual who invested the equivalent of 5,000 Swiss francs became a co-owner of a painting that they may never get to personally view, or only very infrequently: its value is so high that it is kept in a secure facility. It is seldom loaned out to museums and exhibitions.
The Advantages of RWAs
In reality, the benefits of such an investment are numerous and are evident in most RWA operations. It is probable that none of those who acquired AST could have afforded the “Fillette au béret” painting individually. Now, they become co-investors in a high-value piece of art. Furthermore, this Picasso painting is anticipated to increase in value over time. The more its value rises, the more the AST rate will also climb.
Meanwhile, the AST holder is relieved of the responsibility of securing the original artwork, handling insurance, or incurring logistical expenses related to moving the piece to a museum. Therefore, managing such an asset is straightforward for the holder of such a token. Additionally, as highlighted, the presence of a record on the blockchain ensures the inviolability of AST ownership.
An AST holder might one day require liquidity and choose to sell this token. They can do so effortlessly and likely realize a capital gain.
A Market Larger Than Cryptocurrencies?
Do not be deceived: this RWA market holds remarkable potential, as the possibilities for tokenizing elements of the physical world appear limitless. The potential is speculated to reach into the hundreds of trillions of dollars, and some believe this market could surpass the “traditional” cryptocurrency market, including Bitcoin, Ethereum, or Solana.
Indeed, it was the entrance of Blackrock into this market in March 2024 that propelled RWAs forward. As the largest asset manager globally, Blackrock’s interest in the tokenization of real world assets prompted other financial entities, such as Franklin Templeton and Janus Henderson, to launch their own RWA funds.
From Gold to Condominium Apartments
Already, a significant number of real world assets have been converted into tokens, leading the way in this field.
Gold
Consider the case of gold. Regardless of market or economic volatility, this precious metal consistently appreciates in value. Yet, the storage of gold bars necessitates secure vaults and protective measures, deterring many individuals from keeping them at home. However, it is possible to acquire a token from Paxos, the PAXG – Paxos Gold, whose value equates to that of a troy ounce of gold (the standard measurement for silver and gold). Once again, if the gold price appreciates, so too will the value of the PAXG.
The PAXG holder owns a digital asset that is easily traded on platforms like Binance, free from security concerns that are managed by Paxos.
Real Estate
In real estate, the concept extends further because an American company, RealT, manages rental properties and had the innovative idea to tokenize several buildings in cities such as New York and San Francisco. RealT offers the opportunity to acquire shares in property. The minimum investment begins at just $50! Certainly, RealT’s management of some properties has not always been flawless due to tenants’ negligence. However, RealT has amassed over 16,000 investors across more than 535 properties, thus opening real estate investment to a much broader audience than ever before.
Commodities
In Singapore, the island nation to the south of Malaysia, the company Trade Flow Capital Management initiated the tokenization of commodity financing (oil, metals, cereals…). This innovation facilitated simplified access for individual investors to a market traditionally reserved for institutional investors.
The Sky's the Limit
What is there to say? This market remains in its infancy and is receptive to the initiatives of ambitious individuals. RWAs are undeniably one of the most significant opportunities in the blockchain sector. The involvement of Blackrock, alongside players like Goldman Sachs—which launched its own platform in November 2022—indicates that RWAs will proliferate, and that most sectors will be impacted. So, who’s next?
