Stablecoins, tokenized national debt, decentralized private lending, NFTs backed by physical assets, climate and regenerative finance in DeFi—these all fall under the category of Real World Assets (RWA). But how can RWAs integrate with blockchain and cryptocurrencies? This article, sourced from Sanjay Raghavan’s column “7 Real World Asset Trends in 2024 That Will Unlock the Future of Finance,” and compiled, translated, and written by Carbon Value, explores this topic.
Table of Contents:
1. Stablecoins: The Foundation of Programmable Currency
2. Tokenized National Debt: Bridging Traditional and Decentralized Finance
3. Private Lending: Empowering Small and Medium-Sized Enterprises Through DeFi
4. NFTs: Transforming the Financing Model of Collectibles
5. Consumer Brand NFTs: Enhancing Customer Engagement
6. Climate and Regenerative Finance in DeFi
7. Tokenized Deposits and Wholesale Bank Settlements: Revolutionizing Cross-Border Transactions
In an ever-changing financial landscape, the past two years have brought us a series of unique challenges. One of the most significant is the inflation in the United States, which reached a staggering 9.1% in June 2022, leading the Federal Reserve to implement a series of radical interest rate hikes (which are still ongoing).
Meanwhile, the cryptocurrency industry has experienced its own storms, with major projects like Terra/Luna, Celsius, Voyager, and FTX, as well as banks like Silvergate, Signature, and Silicon Valley Bank, collapsing.
Amidst this turmoil, blockchain builders continue to forge ahead, with Real World Assets (RWA) becoming a beacon of innovation and flexibility. Essentially, the tokenization of real-world assets involves creating an investment tool on the blockchain that is associated with tangible assets like real estate or cars, or anything else that may exist in physical form. Once ownership is recorded on the blockchain, assets can be traded, divided, or securely held.
Entering 2024, the following seven RWA trends will reshape the financial landscape:
With federal regulation looming, stablecoins—the epitome of programmable currency—are on the cusp of transformative growth, fundamentally changing our perception of money. In the United States, two issuers dominate this field—Circle (which issues USDC as a multi-chain solution) and Paxos (which provides tokenization solutions like PYUSD for Paypal). Globally, stablecoins have a market value of approximately $125 billion and form the foundational infrastructure powering the value internet. Stablecoins offer stability and flexibility, revolutionizing global payments, remittances, e-commerce, trade finance, and more.
Tokenized national debt represents the true fusion of traditional finance and decentralized finance. As risk-free short-term government bond yields rose from near zero in early 2022 to approximately 5.4% in October 2023, companies like Franklin Templeton, Ondo, Backed, Maple, Open Eden, and Superstate pioneered the tokenization of short-term US Treasury bonds and bank deposits. According to data from token and analytics platform RWA.xyz, this new asset class currently has a market value of $700 million. Tokenized national debt is breaking barriers and providing new avenues for investment and financial inclusivity.
The US private lending market is valued at $1 trillion, and the global private lending market is valued at $1.7 trillion. However, small and medium-sized enterprises (SMEs) have long been unable to access this market. DeFi lending protocols like Centrifuge, Goldfinch, Credit, Maple, and Huma are changing the game, opening the gates for SMEs to access debt capital from public markets, banking systems, and traditional private lending institutions. RWA.xyz, a private lending initiator, focuses on specific industries or regions and currently estimates an active loan volume of $550 million in this market, which is expected to continue growing in the coming months.
The global annual art sales exceed $65 billion (with the US alone accounting for $30 billion), highlighting the immense opportunities in the art market. However, the traditional art and collectibles market lack liquidity and come with high costs (auction houses often charge an additional 15-20% fee for small items). The global collectibles market (coins, stamps, books, comics, art, toys, etc.) is estimated to be worth $400 billion, yet it also suffers from a lack of liquidity. Market platforms like eBay and some smaller bespoke marketplaces cater to this industry’s needs, while lending options are generally limited to higher-interest pawn shops.
Fortunately, decentralized protocols like 4K and arcade.xyz are changing this model. By bringing physical collectibles onto the blockchain, lending against assets like Supreme T-shirts and comic books has become a reality. These initiatives democratize lending, allowing collectors worldwide to access loans.
Leading consumer brands, including Nike, Adidas, Louis Vuitton, and Coca-Cola, are embracing NFTs. From Starbucks on Polygon to rumored private blockchains by Amazon, major brands are leveraging blockchain to enhance their digital footprint, customer engagement, and entertainment experiences. Whether on public blockchains (like Starbucks on Polygon) or private blockchains (surrounding the rumored Amazon efforts), these brands are shaping the future of consumer interaction by incorporating gaming and metaverse elements.
As environmental, social, and governance (ESG) issues receive increasing attention, blockchain technology is driving positive changes in the $2 billion and growing carbon market. Companies like Flowcarbon are utilizing the potential of blockchain to enhance transparency in this critical market. To achieve the goals of the Paris Agreement, this market must grow 15-fold by 2030. Blockchain’s accuracy and transparency throughout the carbon lifecycle are essential for promoting a sustainable future.
Blockchain technology is reshaping the way banks handle tokenized deposits and wholesale settlements. While central bank digital currencies (CBDCs) may not be an urgent issue in the United States, especially if private issuers can be regulated at the federal or state level, some banks are experimenting with blockchain technology for tokenized deposits and internal or interbank wholesale settlements. Pilot projects by industry giants like Citigroup and JPMorgan Chase demonstrate the potential for real-time cross-border transactions. This field will continue to expand in the coming months, increasing the efficiency of global finance.
These RWA trends herald the arrival of a new financial era, providing solutions to long-standing challenges. While their market values may seem small at present, their transformative potential is immeasurable. Stablecoins, tokenized national debt, decentralized private lending, NFTs backed by physical assets, consumer brand NFTs, climate and regenerative finance in DeFi, and tokenized deposits/wholesale bank settlements are not just trends—they are the foundation of a more inclusive, efficient, and sustainable financial future. In 2024, these innovations will undoubtedly lead the way, bringing unparalleled opportunities for businesses and individuals.