The US Financial Services Committee will host a pivotal hearing on tokenizing real-world assets (RWA), officially titled “Next Generation Infrastructure: How Tokenization of Real-World Assets Will Facilitate Efficient Markets.”
This hearing, scheduled for Wednesday at 09:00 ET, aims to determine the necessity of additional regulations to facilitate the development of real-world assets and derivative products. This is crucial for over 500 US and international companies involved in the real-world assets tokenization sector.
Lawmakers to Explore Blockchain’s Impact on Tokenization
The legislative proposal known as the “Tokenization Report Act of 2024” (HR 8464) will be a significant focus of the hearing. This act mandates the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, and the National Credit Union Administration Board to jointly submit a comprehensive report on blockchain technology trends in traditional asset tokenization. The House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs will receive this report within 180 days of the act’s enactment.
The report will explore key areas, such as the potential benefits and risks blockchain networks present for asset tokenization. Additionally, it will delve into topics including the impacts on settlement efficiency, costs, and counterparty risk. It will also differentiate between permissioned and permissionless blockchain networks, assess current interoperability and integration capabilities, and review emerging global regulatory approaches.
Read more: What Are Tokenized Real-World Assets (RWA)?
Furthermore, it will analyze the need for further guidance or rules and the impact of blockchain control features on the risk profile of tokenized assets. A summary of legal permissibility and regulatory requirements will also be included. Public input will inform the report, ensuring a thorough understanding of the topic.
Alongside HR 8464, an unnamed proposal will require the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to study the need for additional guidance or rules. This aims to facilitate the development of tokenized securities and derivatives products.
Key witnesses, like Carlos Domingo (co-founder and CEO of Securitize), will discuss various aspects of tokenization. Topics include tokenization in payments and deposits, private securities and illiquid markets, and physical assets.
Real-World Asset Tokenization Market Poised for Explosive Growth
The Tokenized Asset Coalition (TAC) sent a letter to Chairman French Hill and Ranking Member Stephen Lynch, expressing gratitude for the hearing. TAC, comprising 23 leading companies in traditional and crypto financial industries, emphasized the importance of tokenization.
“Tokenized assets will enable a more efficient, transparent, and inclusive financial system today and will continue to shape a more open and accessible financial future. Tokenized assets continue to grow in scale and breadth, and encouraging responsible innovation in tokenized assets will enable the United States to better compete in a global financial marketplace,” the letter states.
Institutional investors, including BlackRock, have recognized the potential of tokenization of real-world assets. BeInCrypto previously reported that BlackRock CEO Larry Fink is optimistic about tokenization.
He noted its ability to enable customized strategies and instantaneous settlement of bonds and stocks. According to Fink, such abilities can significantly reduce settlement costs.
Data from 21.co also highlights the potential of real-world assets tokenization. As of May 21, the total tokenized value is $85.12 billion. The market is expected to scale into a multi-trillion-dollar opportunity by 2030.
Read more: What is The Impact of Real World Asset (RWA) Tokenization?
“We estimate that the market value for tokenized assets will be between $3.5 trillion in the bear-case scenario and $10 trillion in the bull case by 2030. The market value is derived from the estimated penetration rate of the total addressable market across various asset classes, including non-financial corporate debt, real estate funds, private equity, securities collateral, trade finance, and public debt securities,” 21.co reported.
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