In five to ten years, almost every “real world” asset class could be tokenized in the form of a nonfungible token (NFT) according to Cynthia Wu, Founding Partner and COO of digital asset service platform Matrixport.
Speaking to Cointelegraph, Wu said the best case for NFTs would see the widespread representation of real-world assets to be stored and traded on-chain:“Eventually, all the major financial asset classes are going to be represented on this new financial infrastructure [and] NFTs could be our instrument to represent off-chain assets like real estate deeds, equities or bonds.”
The move on-chain would make these real-world assets “more liquid and more tradable,” which would improve price discovery and transaction activity, Wu added.
But Wu said that while it’s great that we’ve created over two trillion worth of digital native assets on-chain from Bitcoin (BTC), Ether (ETH) and other tokens, the only niche to have generated NFT transaction activity has come from digital collectibles — which hasn’t really helped institutional adoption:“We haven’t really been seeing off-chain assets being represented on-chain，we're now really only at the first 3-5% of it.”
But, nonetheless, Wu is confident that the tide will turn. Earlier this month, a report from Boston Consulting Group (BCG) estimated that the total size of tokenized illiquid assets could reach $16.1 trillion by 2030.
BCG predicted much of this tokenization to come from pre-initial public offering (IPO) stocks, real estate, private debt, and revenue generated from small to medium-sized businesses. However, while the tokenization of real-world assets has piqued the interest of financial institutions, Wu said some have been a bit reluctant to move on from the legacy systems that have served them well over the years.
Wu pointed out the traditional financial system hasn’t accounted for the trading of nonfungible assets because they can’t easily be exchanged the same way a fungible or divisible asset can, but tokenization on the blockchain provides a solution for that. She also argued that blockchain infrastructure is the superior option to legacy systems, citing cost efficiencies, improved liquidity, 24/7 market access and the removal of intermediaries as the main factors that would lead to a more streamlined financial system.
Matrixport was established in Feb. 2019, and currently manages between $3-4 billion in digital assets from a broad mix of retail and institutional clients.
Matrixport said early this month that it locked in $50 million from Canopius, one of the largest syndicates operating under insurance giant Lloyd’s, with more than $2.2 billion in premiums.
Matrixport is led by crypto billionaire Jihan Wu, co-founder of Bitmain Technologies, the largest manufacturer of bitcoin mining rigs. Wu left the firm last year to run spinoff Bitdeer and Matrixport after a lengthy leadership dispute.
Several assets held in cold storage by Matrixport’s institutional custodian, Cactus Custody, will be protected including bitcoin, bitcoin cash, ecash, litecoin and ether, according to a statement.
Attempting to widen its revenue streams outside retail investment, Cactus Custody integrated with MetaMask Institutional at the beginning of the year via a new feature that supports multichain compatibility.
Matrixport’s fresh insurance coverage serves as a bid to attract future growth, despite a slump in both retail and institutional interest.
“The insurance coverage enhances our custody offerings and empowers clients to leverage our ecosystem in a meaningful way, especially for institutional clients where insurance coverage is a compulsory requirement,” Matrixport’s COO Cynthia Wu said in the statement.
Matrixport has kept a keen focus on its operations despite frosty market conditions and a liquidity crunch that crippled numerous crypto firms earlier this year, including Celsius and Voyager.