Interest in asset tokenization is high and some of the world’s largest asset managers have embraced it. With the adoption of tokenized funds by the likes of Franklin Templeton, Blockchains promise to transform financial markets. However, just when it looks like tokenized assets will go mainstream, funding for Blockchain startups has plummeted.
Tokenization has the potential to revolutionize asset management, with several leading companies investigating Blockchain’s ability to digitize various asset classes.
However, with digital asset management appearing poised for mainstream adoption, the momentum in investment in Blockchain development appears to be waning.
Franklin Templeton’s Bold Foray into Digital Backgrounds
Tokenization involves the issuance of digital tokens to represent various assets. With Blockchain technology, assets such as securities, real estate, and art can be digitized, offering a more seamless and transparent trading environment.
Franklin Templeton has been a pioneer in this space. After successfully launching the Franklin OnChain US Government Money Fund (FOBXX) on the Stellar Blockchain, they extended their operations to the Polygon Network.
Currently, the cumulative value of US money market tokenized funds is an impressive $660 million, with FOBXX holding the lion’s share with a market capitalization of $294 million. However, the competition is heating up.
WisdomTree: A New Competitor on the Horizon
Seeking to gain a foothold in asset tokenization, WisdomTree launched several digital funds through its WisdomTree Prime platform this year.
By leveraging the Stellar and Ethereum Blockchains, WisdomTree offered alternatives to Franklin Templeton’s offerings and introduced index funds that track major US corporations.
During an earnings’ call, Jonathan Steinberg, CEO of WisdomTree, recently highlighted the company’s tokenization efforts, emphasizing WisdomTree’s early-bird advantage in this domain.
BlackRock’s Imminent Entry into Digital Asset Management
BlackRock, the global asset management giant, could soon plunge into the waters of tokenization.
Larry Fink, CEO of BlackRock, has consistently highlighted the transformative potential of Blockchain. It has underlined its promise to improve market efficiency and profitability for investors.
BlackRock has not formally stated any tokenization strategy. However, the firm has partnered with Jio Financial Services to design a “digital first” asset management platform for India. It also filed for a Bitcoin ETF with the United States Securities and Exchange Commission, suggesting an upcoming digital transition.
A Paradox: Reduced Venture Capital on Blockchain
Surprisingly, VC funding in the cryptocurrency sector appears to be cooling off even as asset management heats up with Blockchain.
Sequoia Capital recently cut its cryptocurrency venture fund from $585 million to just $200 million, while cutting its cryptocurrency ecosystem fund in half at the same time.
RootData data reveals a marked drop in VC funding for cryptocurrency startups over the past year. From a peak of $12.6 billion in the first quarter of 2022, venture capital investments have slowed to just $2.14 billion in the second quarter of 2023.
The significant decline spans all Blockchain-focused companies, from DeFi and GameFi to NFTs and infrastructure.
The Domino Effect: Cryptocurrency Exchanges Get the Worst Blow
The funds freeze has notably affected cryptocurrency exchanges. Bitkub’s valuation in Thailand plummeted from a peak of almost $1 billion to $184 million.
Many analysts link Sequoia’s spending cuts to its holdings in the now-defunct cryptocurrency exchange FTX. The fallout from the FTX crash continues to deter investors, clouding the future of the industry.
While tokenization presents a promising future for asset management, the broader Blockchain and crypto sectors face challenges, especially when it comes to investments and valuations.
By Marina Meza
