According to a report from JPMorgan, the RWA Tokenization sector is performing worse than expected. Its total market capitalization is 25 billion USD, equivalent to the weekly cash flow of ETFs in the US.
Moreover, most current investments come from cryptocurrency-native companies. Traditional financial institutions are not participating in this trend, and their interest may be declining.
Is RWA Tokenization Failing?
RWA Tokenization is often considered one of the most promising market sectors in cryptocurrency, demonstrating strong performance while enduring broader economic downturn.
Crypto VC companies are very interested, and major governments are exploring their applications. But what if this hype is exaggerated? A bold report from JPMorgan made this statement:
"The total base of tokenized assets remains quite insignificant. The quite disappointing picture of this tokenization reflects that traditional investors have not yet seen a necessity for it so far. There is also no evidence that banks or customers are moving from traditional bank deposits to tokenized bank deposits on blockchain," said Nikolaos Panigirtzoglou, a JPMorgan strategist.
JPMorgan's researchers frequently survey sensitive areas in the cryptocurrency market. The company has heavily invested in RWA Tokenization, so it is reasonable for them to want to assess market impact.
Unfortunately, JPMorgan's conclusion is quite gloomy.
Cryptocurrency Investment Despite Declining Participation
Frankly, most investments in RWA Tokenization come from the cryptocurrency industry. Traditional financial institutions have experimented with the market, but they seem to be losing interest.
For example, BlackRock's BUIDL fund lost 0.6 billion USD in total assets from May to August.
The total market capitalization of this sector is 25 billion USD, of which 15 billion USD is tokenized private credit held by very few companies. As Eric Balchunas, a famous ETF analyst, noted, the entire RWA Tokenization market is equivalent to the average weekly cash flow of ETFs in the US:
"Although I'm optimistic about BTC/crypto ETFs (and stablecoins), I'm not entirely convinced about full tokenization. ETFs are too strong, the value delivered is too good. Tokenization has existed for a DECADE... and still can't beat ETFs. If Wall Street believed tokenized RWAs were the next big thing, we wouldn't see record ETF launches year after year!" Eric Balchunas stated.
Balchunas took this opportunity to argue that RWA Tokenization may have passed its peak. In his view, it might be approaching its conclusion.
If these statements are true, they could have a significant impact on the market. After all, the SEC is planning to bring the US capital market onto the blockchain. Could this market data disrupt these plans?
To be fair, these assertions could be wrong or misleading. This report would have a greater impact if other traditional financial institutions confirmed JPMorgan's statements about RWA Tokenization. However, the cryptocurrency industry should recognize that institutional RWA investment may continue to decline.
