Cryptocurrency’s potential to revolutionize the finance industry isn’t limited to consumer products. Indeed, one of the holy grails represented by blockchain technology is its ability to tokenize real world assets – including everything from real estate to precious metals to artwork and collectibles. Goldman Sachs is making a major move into that space this year with the planned launch of three tokenization offerings with a goal of creating functional institutional marketplaces in the crypto sphere.
The three tokenization projects are thoughtfully designed to capture institutional interest in trading specific assets, according to Mathew McDermott, global head of digital assets at Goldman Sachs, although he isn’t yet willing to clarify what assets those are beyond one involved in the U.S. fund complex and another in the realm of Europe’s debt issuance. Unlike other tokenization projects, such as BlackRock’s Ethereum-based BUIDL, Goldman Sachs’s offerings will operate only on private blockchains as a result of regulatory restrictions.
Unlike traditional marketplaces, Goldman Sachs envisions its blockchain-based exchange as being significantly faster and capable of tying in new types of assets as collateral. Given the increasingly fast-paced world of modern finance, either feature could be enough to draw in significant support from institutional adopters.
This isn’t the first time Goldman Sachs has dipped into the realm of tokenization, as it previously worked with the European Investment Bank on a bond issuance (alongside Société Générale and Santander) and with the Hong Kong Monetary Authority on creating a tokenized sovereign green bond. In 2023, it launched a digital platform to enable enhanced trading of digital assets.
Earlier this year, the launch of the first Bitcoin spot ETFs helped turn the cryptocurrency market around – a development that wouldn’t have been possible without Goldman Sachs’s involvement. Between its earlier experiments in the tokenization space and the three upcoming tokenization-centric projects, it’s clear that the financial giant is fully committed to exploring the potential of the new technology.
Outside of the developments in the institutional space that Goldman Sachs is pursuing, tokenization is becoming a primary focus for banks around the world. Since 2018, both Tier 1 and Tier 2 banks have been aggressively working to explore the potential of real world tokenization. According to the Boston Consulting Group, we could be seeing a total volume of tokenized assets of $16.1 trillion by 2030.
Tokenization is attractive for financial institutions as it not only improves the speed of transactions but offers airtight security and the capacity for built-in functions that can dynamically change how tokens behave (such as integrating automatic compliance actions). Transactions are stored on immutable blockchain ledgers, effectively tamper-proofing records and potentially expediting the transfer of ownership for any number of assets.
Whenever there are trillions of dollars of assets involved – along with virtually every major bank around the world – it’s clear that it’s not in reference to a flash in the pan, fly-by-night development. With behemothic financial institutions entering the crypto industry and adopting blockchain technology on multiple fronts, it’s safe to say that crypto’s financial revolution is currently underway.
