Wall Street's Tokenization Boom Stumbles Over Liquidity

The tokenization boom on Wall Street has brought about a significant increase in the market value of real-world assets (RWA), but it has also highlighted a major issue - liquidity.

According to Chris Kim, founder and CEO of Axis, the industry is focused on the issuance layer, with issuers racing to put assets on chains. However, this is not translating into a functioning market, where assets can be easily traded.

The data shows that while RWA assets have crossed $32 billion in market value for the first time, the ability to trade these assets is lacking. Tokenized Treasuries, which account for roughly half of the RWA market, benefit from the underlying liquidity of US government debt. However, other categories, such as tokenized gold, are highly illiquid and lack continuous secondary market trading.

The fragmentation of tokenized assets across multiple blockchains is also a major issue, with the same asset being issued in 30 different formats. This leads to pricing divergences and capital efficiency losses, estimated to be between $600 million and $1.3 billion per year. If left unchecked, these inefficiencies could reach $75 billion by 2030.