Zoniqx interviewed George Kapff from Archax, the UK’s first regulated RWA exchange, custodian and broker, and registered crypto exchange. Here are some excerpts from the interview.

Q1: In your view, what are the key factors driving the adoption of RWA tokenization across industries, and how does your project align with these trends?

The adoption of RWA tokenization aligns with increasing regulatory clarity, and the wider acceptance of blockchain infrastructure by capital market players. No longer such a novel approach, with institutions moving from POC to production, RWA tokenization is seen as a viable initial use case for achieving the benefits delivered by use of underlying blockchain technology. These include transparency, immutability, efficiency, functionality and fractionalization. We see functionality, or utility, as a key driver for adoption

RWAs in tokenized form can be used for collateral, lending and for intraday capital efficiencies. Tokenization of Money Market Funds is a great example of this, whereby investors can continue to earn yield on their cash whilst using the fund tokens as collateral, or buy/sell the fund tokens instantly on a secondary market against cryptocurrencies or even other tokenized assets.

Q2: How do you foresee the growth of RWA tokenization impacting traditional financial markets and asset management practices in the next few years?

As buyside clients want access to RWA products, and a clear path to distribution, the adoption of this infrastructure will continue to cause disruption and innovation. Outdated practices and inefficient processes will become increasingly obvious as the benefits of improved capital efficiency, intraday liquidity and highly-functional collateral are seen. In the long-term, this technology will completely transform how assets are issued, settled, traded and managed during their lifecycle.

Q3: How is RWA tokenization influencing the strategies and operations of traditional financial institutions?

We believe that all financial institutions are now in the room. Some more actively participating with new strategies and operations in production, many still experimenting, this has been going on since 2017. As the leading players execute their strategies and demonstrate their acceptance, the inevitability of full blockchain adoption will become clear.

Q4: What are the challenges in the RWA tokenization space which can be a barrier or a hindrance, and what do you think can be a solution?

The levers for full adoption and the challenges that are faced include a lack of global standards or jurisdictional regulatory frameworks, fragmented interoperability and liquidity, and a technological lift until the promised utility demonstrates the benefit versus cost. The disparity between private and public blockchains is also a barrier, impacting the ability to scale and resulting in walled gardens for some larger institutions. The concept of permissioned public chains should alleviate institutional concerns, and the blockchain cash-leg continues to see innovation with regulated stablecoins and equivalents.

Q5: BlackRock's BUIDL Fund Token showspromise for using tokenized real-world assets as collateral in crypto margin trading. Do you think this could be a major driver for wider adoption of tokenized RWAs in general? Why or why not?

Yes, BlackRock’s BUIDL is a significant representation of true institutional acceptance – it begins to demonstrate the benefits of adoption, and will likely cause other institutions to innovate at a similar rate. Tokenized money market funds and the associated functionality is the first step and the gateway to all other assets, this will be buoyed by instant exchange of collateral and cash, intraday.

Q6: Looking ahead, what emerging trends or technologies do you believe will significantly influence the direction and success of RWA tokenization initiatives?

Increasing volumes into tokenized money market funds, additional on-chain RWAs, and the roll-out of associated features and solutions including those which enable distribution and interoperability will help unlock demand and participation, and enable secondary market liquidity.

Connect with Zoniqx

For financial institutions interested in exploring or enhancing their capabilities in blockchain and tokenization, Zoniqx offers a powerful and versatile suite of solutions that streamline the tokenization process. You can tokenize any asset, and Zoniqx offers a secure, compliant, and interoperable solution tailored to meet your needs. To learn more about how Zoniqx can help your organization unlock the potential of tokenized assets, or to discuss potential partnerships and collaborations, please visit our contact page 👉 https://www.zoniqx.com/contact.