Yasuda on Tokenization

Frictionless Markets - Into '25 and Beyond

As 2025 starts, we look forward to completing our R&D roadmap for turnkey fund tokenization with several initiatives ready for public release in January 2025, including:

1. Chainlink CCIP and PoR, for liquidity aggregation and cross-chain securities transfers.
2. Frictionless Private Markets platform in partnership with Delio, enabling Managers to efficiently and seamlessly issue digital funds with incredibly low total expense ratios, ultra-low minimums and 365/24/7 distribution. 
3. Broader API access for issuance, transfer and settlement of Frictionless tokenized funds, including cross-chain settlement.

As an issuer of tokenized cash, money markets and fund units, we have begun exploring various additional licensing regimes to expand our offerings across the institutional and non-institutional markets. 

Explosive Growth in Real-World Asset Tokenization

• The tokenization of real-world assets (RWA) is set to experience explosive growth in 2025, with projections suggesting the market could reach between $2 trillion and $30 trillion over the next five years. This remarkable expansion is driven by increased institutional adoption, technological advancements, and the integration of blockchain technology into traditional finance. Major players like BlackRock are already entering the space, with tokenized US Treasury funds tripling in value from $760 million to $2.6 billion by the end of 2024. The trend is expected to revolutionize various sectors, including real estate, commodities, and intellectual property, by enhancing liquidity, transparency, and accessibility for both institutional and retail investors.

• As the RWA tokenization market matures, it is poised to reshape the financial landscape fundamentally. The tokenization of illiquid assets like real estate is expected to go mainstream, allowing for fractional ownership and increased market participation. This democratization of investment opportunities will enable smaller investors to access previously unreachable markets and diversify their portfolios more effectively. Additionally, the integration of tokenized assets with decentralized finance (DeFi) platforms is anticipated to create new financial products and services, further driving innovation in the sector. As regulatory frameworks become clearer and compliance tools improve, 2025 is shaping up to be a pivotal year for the growth and adoption of RWA tokenization across global markets

Private Equity Firms Push for Retail Access, more interests for tokenizing private funds should follow

• Major private equity firms are actively pursuing regulatory changes to allow retail investors access to private funds, seeing it as a significant growth opportunity. Blackstone aims to expand retail capital from $200 billion to $500 billion, while KKR expects 30% to 50% of new capital raised in the coming years to come from the private wealth channel. These firms are developing innovative fund structures and investing in sales teams and advisor training programs to target the mass affluent market.

• Governments and regulators are responding cautiously, balancing increased investment opportunities with investor protection concerns. The UK is establishing PISCES for private company shares, allowing certain retail investors to participate. The FCA has allowed long-term asset funds into UK retail markets with strict risk ownership requirements. In Europe, the revised ELTIF 2.0 framework aims to encourage more private investor commitments into private capital.

• The push for retail access is likely to accelerate fund tokenization in the private equity industry. Tokenization can democratize access to investments, allowing smaller investors to participate in traditionally illiquid markets. By converting ownership rights into digital tokens on a blockchain, private equity firms can enhance liquidity, lower barriers to entry, and streamline investment management processes. This shift could lead to reduced operational costs and complexities, enabling fund managers to set smaller minimum investment sizes and attract a broader range of investors. Moreover, the use of smart contracts in tokenized funds can automate capital calls and distributions, significantly improving efficiency and transparency in fund operations. However, tokenization faces regulatory challenges and requires careful consideration of legal frameworks and governance structures. As the industry moves towards tokenization, it may also enable scalable customization of tokenized portfolios to meet diverse investor needs.

Stablecoins Poised to Revolutionize Global Payments Landscape

• Stablecoins are emerging as a transformative force in the global payments ecosystem, offering significant advantages over traditional cross-border payment methods. By leveraging blockchain technology, stablecoins enable near-instantaneous transactions with lower fees, reducing the need for intermediaries and streamlining treasury operations for multinational corporations. This technology has the potential to revolutionize various sectors, including cross-border payments, remittances, and even Internet of Things (IoT) payments. Major players like Visa and PayPal are already embracing stablecoins, signaling a shift towards wider adoption and integration into existing financial infrastructures.

• Credit card companies, particularly Visa, are taking significant steps to incorporate stablecoins into their operations. Visa has expanded its stablecoin settlement capabilities, allowing web3 merchants to receive card receipts using the USDC stablecoin through acquirers like Worldpay and Nuvei. Furthermore, Visa has launched the Visa Tokenized Asset Platform (VTAP), enabling banks to issue fiat-backed tokens such as stablecoins and tokenized deposits. These initiatives by major financial institutions are not only expanding the use cases for stablecoins but also enhancing their stability and legitimacy, potentially marking a significant shift in how stablecoins are perceived and utilized in the broader

Tokenized MMFs: Revolutionizing Collateral Management in 2025 and Beyond

• Tokenized Money Market Funds (MMFs) are emerging as a revolutionary solution for collateral management in financial markets. By leveraging blockchain technology, these tokenized assets offer significant advantages over traditional MMFs when used as collateral. The ability to post MMF shares directly as collateral without first redeeming them to cash provides greater efficiency and stability, particularly during times of market stress. This innovation allows investors to retain the yield on their assets while they are being used as collateral, eliminating the need for inefficient, manual processes involving multiple systems and intermediaries. The potential benefits of using tokenized MMFs as collateral are substantial and far-reaching, enabling instant transfers of collateral, reducing intraday exposure and associated banking fees while minimizing counterparty credit risk, bankruptcy risk, and performance risk.

• Looking ahead to 2025, the adoption and expansion of tokenized MMFs as collateral in financial markets are expected to accelerate significantly. Major financial institutions, such as JPMorgan with its Tokenized Collateral Network, are likely to see increased usage of tokenized MMFs for derivatives trading and other applications. Regulatory clarity is anticipated to improve, potentially including favorable treatment of tokenized MMFs as High-Quality Liquid Assets (HQLA). This recognition could boost their use as collateral, allowing for easier integration into existing financial systems and risk management frameworks. The use cases for tokenized MMFs are expected to expand beyond derivatives trading, potentially including intraday repo transactions, collateral for cross-border payments, and applications in traditional finance businesses like exchanges or card networks.

• Technological advancements in 2025 are likely to enhance the scalability and utility of tokenized real-world assets, including MMFs, leading to more efficient collateral management processes and reduced operational risks and costs. The tokenized fund market, including MMFs, is projected to grow significantly, with BCG estimating that tokenized fund assets under management could reach 1% of global mutual funds and ETF AUM by 2030, implying an AUM of more than $600 billion. As central bank digital currencies (CBDCs) and regulated stablecoins gain traction, tokenized MMFs are expected to become more integrated with these digital forms of money, further enhancing their utility as collateral, particularly for cross-border transactions. This integration, combined with increased institutional adoption and expanded use cases, positions 2025 as a potentially transformative year for the use of tokenized MMFs as collateral in the financial industry.