Tokenization of Real-World Assets is Gaining Momentum, Says Bank of America

While U.S. dollar-backed stablecoins continue to dominate the conversation, recent discussions with investors indicate a growing focus on the tokenization of real world assets (RWAs), including stocks, bonds, bank deposits, and real estate, Bank of America (BAC) said in a report Monday.

According to BofA, this shift marks the beginning of a multi-year journey toward fully blockchain-based transactions.

The transformation will require significant infrastructure development but promises a new era of 24/7 access across global jurisdictions, instant settlement, and enhanced liquidity, all underpinned by smart contracts that ensure compliance, the report said.

Tokenization of real-world assets on a blockchain involves bringing traditional assets like real estate, bonds, and commodities into the digital realm. This process allows for fractional ownership, easier trading, and increased accessibility of these assets.

A notable example of this evolution is the recent launch of a tokenized real estate platform by the Dubai Land Department (DLD), the bank’s analysts said.

This initiative, which aims to digitize up to $16 billion in real estate by 2033, will also introduce fractional ownership, broadening access to a previously illiquid asset class, the analysts noted.

Bank of America said a recurring concern among investors has been the potential disruption to Citi’s (C) transaction services business, which accounts for around 40% of the bank’s bottom line, as blockchain technology gains traction.

While the risk of disruption to traditional revenue streams, such as net interest income from deposits or fees, remains a possibility, there’s a growing belief that investors may be underestimating Citi’s expertise and adaptability in blockchain technology, BofA said.

The push for tokenization signals a significant milestone in the adoption of blockchain technology for real-world applications, the report added.