S
tate Street Global Advisors (SSGA) has published a report on the benefits of tokenization across various asset classes, with $4.4 trillion in assets under management. The firm is optimistic about tokenization's potential to make markets faster, cheaper, and more accessible, but notes that creating an ecosystem will take time.

    Tokenization can address existing barriers such as legal issues and outdated registries, but others may persist due to regulatory hurdles like anti-money laundering (AML) and know-your-customer (KYC) requirements. Additionally, certain asset classes like private equity and credit funds may remain restricted due to their high risk profile.

    The report explores several asset classes, including bonds, commodities, public equity, alternatives, and real estate. Bonds are expected to be the largest tokenized asset class in the near term, followed by commodities and private equity/credit funds. However, many digital bond issuances have been driven by motivations beyond cost and speed, such as demonstrating leadership or gaining a competitive edge.

    The report also considers the tokenization of real estate, which is seen as likely to take off in the medium term but faces competition from existing real estate investment trusts (REITs). Tokenizing individual residential properties is expected to be the most challenging due to legal issues surrounding fractional ownership. SSGA's digital assets arm is gearing up for digital bonds and tokenizing money market funds as collateral, while highlighting the need for greater investor protections in real estate investments.