The Future of Tokenization: Focusing on Liquid Assets for Financial Innovation

Tokenization: The Future of Finance Lies in Liquid Assets

By Sebastián Serrano, Founder and CEO of Ripio

For nearly a decade, the crypto industry has been on a quest to tokenize niche assets, aiming to revolutionize finance. However, this approach has often overlooked a fundamental economic truth: tokenization creates real value when applied to the core of the economy, not its fringes.

In the early days of blockchain adoption, the industry’s instinct was to tokenize illiquid assets. This miscalculation has become evident as the most successful tokenization efforts have centered around the world’s most liquid asset—the US dollar—through USD-backed stablecoins. Today, companies are exploring tokenized versions of other highly liquid assets, such as Treasury bills, smaller currencies, and stocks. This shift is no coincidence; tokenization thrives on assets that already have substantial demand and established legal and financial frameworks.

The Power of Demand

Tokenization should begin with assets that are already in high demand—money, sovereign debt, and major financial instruments. These are the foundational elements of the global economy, utilized daily by governments, corporations, and individuals. By tokenizing these assets, we are not creating demand from scratch; we are enhancing the infrastructure that facilitates the movement of trillions of dollars.

Historically, electricity was first harnessed to power factories, not art installations. Similarly, blockchains will reach their full potential when they focus on tokenizing money and core financial primitives rather than niche assets.

Stablecoins exemplify this principle. They seamlessly map onto an existing, massive use case, enabling the rapid and cost-effective global movement of dollars. Tokenized treasuries are gaining traction for the same reason—they represent high-demand assets that institutions already hold at scale.

Reducing Friction and Enhancing Efficiency

Tokenization adds the most value where inefficiencies exist. Bonds, for instance, move trillions of dollars but do so inefficiently. Tokenization can compress settlement times from days to minutes, allowing assets and cash to move together in real time without intermediaries. This transformation alters the cost structure and risk profile of financial operations.

Network effects emerge around assets in high demand, such as money and sovereign debt. Tokenizing these assets fosters immediate interoperability, enabling everyone to build around the same unit of account. This is why stablecoins have become the backbone of on-chain finance.

In contrast, NFTs and bespoke real-world assets (RWAs) are inherently fragmented. Each asset is unique, legally ambiguous, and difficult to standardize, preventing them from anchoring broad financial network effects. While they may hold cultural or speculative value, they lack the capacity to serve as a shared economic layer.

Unlocking New Financial Behaviors

Tokenizing liquid assets opens the door to entirely new financial behaviors. Continuous settlement, streaming payments, and automated collateral management are just a few innovations that tokenization can introduce. The ability to use tokenized assets as collateral largely depends on their liquidity. Liquid assets can be integrated safely into automated systems, while illiquid assets, with their sporadic trades and subjective valuations, pose significant challenges.

Moreover, capital efficiency improves dramatically for liquid assets. Tokenized instruments can be rehypothecated, fractionally deployed, and programmatically allocated in real time, allowing capital to move swiftly across the system. However, tokenization does not create continuous markets for illiquid assets.

The Road Ahead

Dollars, government bonds, and large corporate debt come with well-established legal statuses, issuer accountability, and regulatory frameworks. Tokenization can seamlessly fit within existing financial laws, making institutional adoption more straightforward. In contrast, NFTs face challenges related to ownership, custody, enforceability, and investor protection, which can introduce more risk than reward.

The future of tokenization will be defined by economically central assets. While the crypto sector’s early experiments with NFTs were understandable, they were ultimately misguided. Stablecoins have demonstrated the potential of tokenizing the most liquid asset in the world, paving the way for tokenized government bonds and equities. This evolution is how blockchains transition from experimental technology to foundational financial infrastructure.

As we look ahead, the focus should be clear: tokenization is most powerful when it enhances the assets that already drive our economy. By concentrating on liquid assets, we can unlock the true potential of blockchain technology and redefine the future of finance.