Tokenization of Real Assets Gains Popularity Among Major Financial Institutions

The credit market is undergoing a significant transformation. New private investment models are gaining prominence, and asset fragmentation through tokenization is one of the main trends in the financial market. Once associated only with the crypto market, advancements in blockchain technology have led to the emergence of Real-World Asset (RWA) tokenization, which has the potential to revolutionize traditional financial markets. The importance of tokenizing RWAs lies in its power to democratize investment opportunities.

The private credit sector has shown significant growth driven by the adoption of tokenization, with the global market reaching approximately $8 billion by early 2024. Various institutions in Brazil and worldwide are leading the way in private credit tokenization. Santander Brazil partnered with IBM to create a tokenization platform to increase liquidity and accessibility to the market, focusing on various assets, including credit card receivables and real estate. BTG Pactual, a leading investment bank in Latin America, launched a tokenized investment fund in RWAs focused on Brazilian agribusiness assets, promoting diversification and creating new investment opportunities. Itaú Unibanco is testing the tokenization of fixed-income securities in collaboration with B3, aiming to improve market efficiency and accessibility. XP Investimentos created a tokenization platform in partnership with ConsenSys, focusing on tokenizing assets such as startups and growing companies to democratize access to high-growth investment opportunities.

“The adoption of tokenization by major financial institutions demonstrates the practical applications and benefits of this technology in real-world scenarios,” says Tiago Piassum, CEO of Rivool Finance and tokenization specialist. Centrifuge, for example, facilitates the tokenization of RWAs, including private credit, increasing liquidity and providing access to decentralized financial markets (DeFi). Goldfinch focuses on decentralized credit infrastructure, enabling the tokenization of private credit to increase access to capital for borrowers globally. Meanwhile, Maple Finance, a DeFi lending platform, facilitates corporate lending using smart contracts on the blockchain.

In practice, tokenizing RWAs involves converting the property rights of an asset into a digital token within a blockchain, a distributed ledger technology that ensures the security and transparency of digital transactions. “Tokenizing RWAs involves several steps. Initially, it is necessary to identify a suitable asset for tokenization and determine its market value, developing digital tokens that represent shares in the asset using smart contracts on a blockchain. Then, by ensuring that the tokenization process complies with regulations, tokens are issued that can be traded on various blockchain-based platforms, allowing investors to buy and sell their shares,” explains Piassum.

According to the expert, tokenization can significantly reduce transaction costs by eliminating intermediaries and automating processes through smart contracts, making asset transactions more economical. “Improved liquidity allows traditionally illiquid assets, such as real estate or agricultural products, to become more liquid through fractional ownership, allowing smaller portions of the asset to be traded,” describes Piassum.

The first Brazilian real estate transaction with digital currency was conducted in Porto Alegre using D¥N (digital payment token) from Dynasty Global AG. The purchase process was executed in minutes through tokenization and blockchain. Blockchain technology offers an immutable record of all transactions, ensuring a clear and auditable history of ownership and asset transfers. Additionally, tokenization reduces entry barriers for investing in high-value assets, democratizes investment opportunities, and allows a broader audience to access and invest in previously inaccessible assets.

Driven by technological advances and the growing recognition of its benefits, tokenization in the current financial landscape is influenced by ongoing quantitative tightening measures, leading to a shift in investor sentiment toward risk aversion. In this environment, the popularity of stablecoins—cryptocurrencies pegged to stable assets such as the US dollar—has increased within decentralized finance (DeFi) and emerging applications. “RWA tokenization is experiencing significant growth due to the development of practical and attractive applications, organic user demand, substantial on-chain liquidity, and favorable macroeconomic catalysts. The trend is expected to gain even more prominence in the market in the coming years,” says Piassum.

About Rivool Finance

The agro-fintech aims to bridge the gap between global institutional investors and the private credit market in the Brazilian agricultural sector. It is the only Brazilian company proactively bringing external institutional investors to invest in medium-sized agricultural companies through private tokenization.