Tokenized Asset Market to Hit $16T on Public Blockchains

Traditional finance (TradFi) institutions are increasingly adopting the tokenization of financial assets on public blockchains, signaling a significant evolution in the sector. Markus Infanger, Senior Vice President at RippleX, indicated that TradFi is moving financial assets on-chain to address various industry pain points and scale up for production use.

Infanger observed that the use of blockchain technology in traditional finance is shifting from theoretical to practical applications. “We’re witnessing a paradigm shift for blockchain technology, evolving from the initial hype to genuine utility. This transition is now unfolding,” he noted.

He also mentioned that research forecasts the market value of tokenized assets could reach $16 trillion, which is about eight times the current total market capitalization of all cryptocurrencies. This growth is anticipated to occur predominantly on public blockchains, a scenario that seemed unlikely a few years ago when private corporate blockchains like JPMorgan Coin or IBM were the focal points.

The dialogue with financial institutions about tokenization projects on the XRP Ledger is advancing. These institutions are preparing to distribute and clearly define their use cases for blockchain technology. An example of this integration was seen in November 2023, when HSBC collaborated with Ripple-owned Metaco to launch a custody platform for institutional investors to manage tokenized securities.

Infanger elaborated on Ripple’s strategy to expand its services beyond payments to include a holistic suite of solutions that leverage the XRP Ledger. “While traditionally viewed as a payments-first company, Ripple is broadening its appeal by integrating services that cater to both TradFi and decentralized finance (DeFi) sectors,” he explained.

Ripple’s recent initiative to launch a U.S. dollar-pegged stablecoin on the XRP Ledger and Ethereum is intended to enhance its institutional offerings. This move aligns with the significant potential growth in the stablecoin market, which Infanger predicts could reach $2.8 trillion in five years, from the current $130 billion.

The demand for a robust stablecoin in the XRPL ecosystem, similar to USD Coin or Tether, has been a persistent request from developers. Ripple has experimented with stablecoins on a small scale in conjunction with XRP and its payment products, envisioning a dual role for the stablecoin in facilitating institutional DeFi applications and providing additional utility within its payment systems and the broader XRP ecosystem.

Details about the launch and naming of the stablecoin, which will be available on both the XRPL and Ethereum platforms, have yet to be confirmed by Ripple.