Larry Fink predicts Bitcoin ETFs are the start of a $10tn tokenisation trend on Wall Street
Financial institutions have been exploring if blockchain technology can simplify the capital markets for a while. Regulatory obstacles are one of the challenges hindering the overhaul of market infrastructure. However, a bullish market trend is reigniting interest in this proposition.
Larry Fink, the CEO of BlackRock, must be pleased with the performance of the Wall Street giant’s Bitcoin exchange-traded fund, which has attracted over $10 billion in flows since its launch in January. Fink’s vision goes beyond this success, as he aims for “the tokenisation of every financial asset.”
On the ground, there is a growing interest in tokenising financial assets like stocks, bonds, and funds to enable trading and tracking on the blockchain. Projections suggest that tokenised “real-world assets” could be valued at $10 trillion by 2030.
While retail traders are caught up in the excitement of the latest Bitcoin surge, traditional financial institutions are taking a strategic approach. Despite facing technological hurdles, a lack of market infrastructure, and uncertain regulations, they are looking towards long-term gains.
Investment banks and other financial institutions have been experimenting with blockchain technology for years to enhance the efficiency of capital markets. Despite challenges such as scalability issues, transparency concerns, and cybersecurity risks, progress is being made in proving the concept.
Regulators have historically viewed blockchain technology with skepticism due to its association with cryptocurrencies and past scandals. However, banks are gradually getting comfortable with the technology, leading to innovative projects like digital bonds and blockchain-based services for settlement.
While the current market structure relies heavily on intermediaries and outdated technology, blockchain offers the promise of more efficient record-keeping and ownership tracking. To fully leverage tokenisation benefits, a new market infrastructure is essential.
Regulatory hurdles have been a major obstacle for financial institutions looking to tokenise assets. However, regulators in the UK, EU, and US are beginning to support tokenisation efforts by creating sandboxes to monitor and potentially adjust existing laws to accommodate innovation.
The shift towards embracing tokenisation by financial regulators is a positive development for the industry. It allows for experimentation and exploration of new possibilities in the tokenisation of financial assets, paving the way for a more efficient and transparent market infrastructure.
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