The story of real world asset (RWA) tokenization has gained traction in recent months, establishing itself as a growing niche in the digital asset market. But for Mike Cagney, the current enthusiasm lacks a critical analysis of technical efficiency.
The American businessman warned that “the market is addicted to the idea of tokenizing everything” and suggested: To question the true utility of this trend, we need to take a step back.
Mr. Cagney is a key figure at the intersection of Wall Street and digital assets. As co-founder of SoFi and current CEO of Figure, he is focused on the growing crypto-backed lending industry.
According to the manager, most asset tokenization projects, even when proposing to use this technology, fail due to “perceived efficiencies” that are not, or because they are trying to access funds that don’t actually exist. For experts, There are only three good reasons to place assets on a decentralized network.
First, Cagney points out transaction efficiency. The manager explains that Figure uses the Provenance network to reduce loan origination and securitization costs, highlighting that “real-time movement of assets with synchronous settlement in stablecoins reduces adjustment costs.”
Second, although we mention liquidity, we make clear that the simple act of tokenization does not automatically generate liquidity. “Liquidity requires ubiquity, truth and market creation,” he said.
Finally, he highlighted decentralized finance (DeFi) as the most important value proposition for enabling bilateral peer-to-peer lending. “DeFi is asset-based. For it to work, guarantees must be liquid,” he cautioned, stressing that If there were no secondary market, no one would lend against the interests of private equity.
Challenges of tokenization compared to traditional markets
Comparing crypto technology to established markets such as the Nasdaq, Cagney recognizes the operational advantages of decentralized networks.
Operational efficiency will be slightly improved. It has slightly higher liquidity and is traded 24/7 (…) And things like cross-collateralization and stock lending order books can be very valuable in DeFi. This means: a) The capital is specific to the chain, not the IOU. b) It has a liquid business unit. c) Can be transferred to the DeFi market.
Mike Cagney, American businessman and investor.
The focus on digital assets coincides with increased interest from financial institutions. As CriptoNoticias previously reported, companies such as BBVA anticipate the transformation of banking through tokenization. This means Wall Street giants are trying not to be left behind in the transition of securities to digital rails.
The above is not isolated. The RWA sector has grown rapidly over the last year. As seen in the chart below, the total amount of tokenized real-world assets increased by 131% in 11 months, from USD 7.2 billion to USD 16.691 billion.
Despite criticism of over-optimism, Cagney believes we are facing a paradigm shift. In his opinion, the key lies not in the amount of assets brought into the network, but in the infrastructure that enables interoperability. Transparency in Bitcoin markets and other digital assets.