BlackRock 'leading tokenisation of real-world assets on blockchains'

BlackRock (BLK) is leading the charge in the mass tokenisation of real-world assets on blockchains, according to Zodia Markets Ireland chair Michael Walsh.

"BlackRock has already got $16bn in their spot bitcoin ETF and they also have a dollar-denominated US Treasury Fund, which has been tokenised with immediate inflows of almost a billion dollars," Walsh told Yahoo Finance's Future Focus this week.

"It has seen huge demand and it gives them a market leading position."

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BlackRock's use of blockchain technology was given a boost with the approval of their spot bitcoin exchange-traded fund (ETF), called the iShares Bitcoin Trust (IBIT), by the US Securities and Exchange Commission (SEC) in January of this year.

BlackRock CEO Larry Fink said he saw this as a stepping stone towards the tokenisation of all real-world assets.

“I think ETFs are step one in the technological revolution in the financial markets. Step two is going to be the tokenisation of every financial asset. And to me, this is where we believe it's going, so we're looking at bitcoin, we're looking at ETFs in the same manner, these are technological changes that can allow us to move forward with tokenisation,” Fink told CNBC news earlier this year.

Tokenised real-world assets on the ethereum network

In March, BlackRock unveiled its first tokenised fund, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), issued on the ethereum network.

Walsh said: "Ethereum is certainly reliable, it's established in smart contracts and across various financial market applications, but, most importantly, it's a public blockchain.

"The key difference here is control, as on a public blockchain, like ethereum, you and I are participants, in control of our own assets and keys, and this means only we can influence the transfer of the asset on the blockchain."

Walsh then compared this to private blockchains, developed by some US banks. "They control everything, the valuation, movement, and even the chain itself," Walsh said.

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"Public blockchains, and particularly ethereum for the time being, are probably going to be dominant," he added.

Tokenisation of real-world assets and increased accessibility

Walsh emphasised the transformative potential of asset tokenisation, highlighting its impact on financial accessibility. He suggested that tokenising real-world assets, such as real estate deeds, could simplify transactions significantly.

"Imagine a world where your house deeds were tokenised. Instead of extensive legal processes, you could match fields and transfer ownership with the press of a button, reducing complexity for buyers and sellers,” he said.

He said tokenisation could enhance financial flexibility, allowing fractional ownership of assets that were previously inaccessible. "If assets like US Treasuries or corporate shares are tokenised, individuals can invest any fraction they choose, promoting liquidity and democratising access to investments."

With current restrictions, "many countries don't allow fractionalised shares, but tokenisation could allow anyone to buy and sell small portions of assets instantly," he said.

Tokenisation democratising access to financial products

Tokenisation could democratise access to traditionally exclusive financial products like private equity and litigation finance pools, according to Walsh. "Tokenising these pools means that anyone, not just the wealthy, can invest in increments as small as $100 online," he said.

This represents "the democratisation of finance," opening new opportunities for retail investors, he said.

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Addressing concerns about security, Walsh pointed out that blockchain-based transactions can be more traceable and secure than traditional cash transactions. "Unlike cash, which is untraceable, every transaction on a blockchain is recorded, enhancing transparency and traceability."

However, Walsh acknowledged the need for regulatory frameworks to support the widespread adoption of asset tokenisation. He noted that while cash remains the least regulated form of currency, tokenised assets can offer greater security and regulatory compliance. Looking forward, Walsh predicted a growing demand for asset tokenisation.

He said: "As more people utilise distributed ledgers to store their assets, there will be a rush to digitise and tokenise assets for faster, cheaper, and more fungible transactions."

The benefits of tokenising real-world assets

Tokenisation involves converting the rights to an asset, whether it be bonds or real estate, into a digital token on a blockchain network. It enhances liquidity, turning previously illiquid assets like buildings or artwork into easily traded tokens.

Traditionally, bonds have been the domain of large financial institutions often out of reach for everyday investors. The traditional bond issuance process is costly, involving intermediaries like clearing houses, and underwriters as well as significant legal fees. By tokenising bonds, assets could become more available to retail investors, increasing their liquidity and affordability.

Watch: Turning real assets into tokens on blockchain has $15tn market potential | Future Focus

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