Congress Considers Benefits of Tokenizing Real World Assets

On June 5, the House Financial Services Committee held a hearing titled "Next Generation Infrastructure: How Tokenization of Real-World Assets Will Facilitate Efficient Markets."

The discussion focused on tokenization, the process by which real-world assets like stocks, bonds, and real estate are represented digitally on a blockchain.

“With the help of blockchain, tokenization can automate some of [the] critical processes within a financial transaction, bringing along streamlined settlement and lower costs,” said committee Chairman Rep. French Hill of Arizona in his opening remarks.

One of the examples discussed was BlackRock’s BUIDL fund, which has distributed $1.7 million in dividends to date using the Ethereum blockchain, highlighting the technology’s ability to streamline and automate aspects of asset management and financial transactions. BUIDL has grown to a $462 million market capitalization in less than three months.

U.S. lawmakers heard testimony from several industry experts, including Nadine Chakar, the global head of DTCC Digital Assets, who emphasized the transformative potential of tokenization for established markets such as U.S. equities and Treasuries.

The DTCC is no stranger to the technology, having recently conducted a ‘Smart NAV’ pilot to evaluate the feasibility of distributing mutual fund Net Asset Value (NAV) data on blockchain networks.

Carlos Domingo, co-founder and CEO of Securitize, shared insights into his company's efforts in creating regulated platforms for tokenizing and trading financial assets on public blockchains.

"This technology can improve how money flows from companies to investors so investors can redeploy their assets and get better returns," he said.

Robert Morgan, CEO of the USDF Consortium, discussed tokenization's potential to improve financing options for consumers and small businesses. By offering more efficient payment solutions and reducing credit costs, tokenized mechanisms like bank-minted deposit tokens could enhance financial inclusion, according to Morgan.

Chairman Hill also criticized the anti-crypto stance of U.S. financial regulators, such as the SEC and Federal Reserve.

“The private sector should not have to pursue a financial regulator’s endorsement prior to exploring the latest innovation in technologies for a possible way to save the company and consumers money and have a more effective product,” he noted.