✍️ State of Security Tokens 2023 - Q2 Report

The tokenization theme has only strengthened since the start of 2023 with Q2 arguably applying more pressure than ever. Whether you’re a fan of ‘tokenized assets,’ ‘real-world assets (RWA),’ or maybe prefer the ‘on-chain finance’ nomenclature that’s emerging, the bottom line is that this category within digital assets is now becoming a catch-all - which is something we’ve been expecting.

Tokenization is the digital assets theme that institutions are leaning into. We’ve seen firsthand through our consulting and advisory business that major global asset managers, index providers, commercial banks, and even crypto native firms are evaluating and establishing themselves to prosper as this wave continues to form and as assets transfer to blockchain ledgers. With so many components of existing capital markets to include and improve - from broker-dealers to transfer agent services to fund administration to product distribution channels to deal structuring and to buy-side players like RIAs, wealth managers, and hedge funds - tokenization is truly the next technology overlay to capital markets.

As readers will find out pretty quickly in this publication, the term “tokenization” should be thought of a bit deeper than simply issuing a feeder fund private equity product or a standalone digital fund while 99% of the remaining business line is in legacy form. Rather, begin pondering on the scalability and the benefits that tokenization is enabling in the back- and middle-offices. To really unlock efficiencies that blockchain technology promises at scale, these end-to-end digital solutions that run through the underlying plumbing and operational practices will need to be formed and implemented. That can be done in-house or with the service providers and blockchain partners that we cover in depth here.

With all of that in place, we’ll start to see real buyers and the demand side meet the greater supply that’s already there on the tokenized product side, from real estate to private equity, private credit, and other alternatives, as well as the not-so-niche cohort of money market funds and treasury products that are gaining steam on their way to that $1 billion in collective AUM mark. We hope everybody enjoys the read and finds it useful to their own strategies as it’s largely comprised from the direct conversations and insights we draw as tokenization advisors.