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The U.S. Securities and Exchange Commission (SEC) has to make some big decisions soon.
Though now delayed, the SEC decision surrounding the spot Bitcoin ETF filing from BlackRock has everyone even remotely involved with crypto on the sting of their seats, and for good reason. BlackRock has more assets under management than most countries’ entire GDPs, and having the world’s largest asset manager entering the crypto game will send reverberations across all the landscape. More importantly, an SEC approval would signal to other leading traditional financial institutions that crypto is back on the menu as an investment and product option.
But if the crypto and blockchain community has learned anything, it’s that nothing is promised. Despite BlackRock’s near-flawless ETF approval rate and surprise courtroom wins for Grayscale and Ripple Labs against the SEC — truly, anything can occur.
So, for example we expect the unexpected, and the SEC rejects BlackRock’s ETF filing. It’s unlikely that this can dampen crypto’s institutional ambitions and strides to proceed partnering with traditional financial infrastructures. You may even see this variation in trajectory throughout the industry’s bear market, where the projects still left standing have shifted gears towards sustainable growth and technical, practical use cases.
Related: Bear With Me: 3 Ways To Capitalize During the Crypto Winter
Beyond the ETF
With shifting developments come shifting trends, and the institutional blockchain space isn’t any exception. But with that in mind, it is important to keep in mind that people behind the institutions guide their decisions and techniques amid these trend shifts. Of course, it isn’t a great idea to hop on every trend in any field, and the normal financial space is frequently well aware of that.
But what should the human force behind these traditional institutions be prepared for within the blockchain space aside from the incoming SEC decision and ETF filings? The directions point towards the rise of tokenized real-world assets (RWAs).
If you are outside of the blockchain bubble, tokenized RWAs have been steadily climbing the ranks as a viable, long-term option to utilize blockchain technology. Essentially, tokenizing a real-world asset involves making a virtual investment vehicle that is linked to a tangible item. That tangible item can range from precious metals, art, collectibles, and real estate.
In practice, tokenized RWAs open up the gates to a couple of differing uses. Let’s say you purchase a house — an immutable record of your ownership may be placed on the blockchain as an alternative of receiving a deed. But tokenizing RWAs also allows assets to be fractionalized, meaning multiple people can own or put money into a fraction of a single physical asset.
Related: I Want To Buy My Groceries With Crypto — So What’s Stopping Me?
Some projects centered around fractionalized RWAs did emerge within the last crypto bull run, but they typically honed in on NFTs and sustained themselves on diminishing hype cycles. Now, the deal with fractionalizing tokenized RWAs targets market-resistant asset classes where investor appeal is perennial. By doing so, fractionalization also allows assets with a high-cost barrier to turn out to be more accessible to on a regular basis investors, similar to superb art or precious metals. The average person may not need to own a portion of one single pair of rare sneakers, but owning a part of a Warhol may very well be more enticing.
Tokenized and fractionalized RWAs show what can occur when crypto and blockchain technology work in tandem with traditional finance and never in opposition to it. They also exhibit a viable path forward for institutions beyond whatever happens with the slew of crypto ETFs sitting on the SEC’s docket.
However, creating digital assets for institutional use is not an easy plug-and-play task. There are real technological, security, and regulatory hurdles to clear in bringing RWAs on-chain and making them available for the general public to interact with. Yes, many countries and international regulators are moving towards some kind of regulatory clarity with regard to blockchain and cryptocurrency. But meaning the people working for traditional financial institutions need to be firmly aware of what they’re moving into.
That type of infrastructure creation to make sure traditional financial institutions are offering digital assets safely and consistent with regulatory requirements may be daunting. However, some crypto-native corporations aim to assist carry the load. GK8, as an illustration, tailors its product line for institutional use—covering all the things from custody and enterprise-level security to tokenization.
Related: When in Doubt, Don’t: 4 Lessons to Learn from the Crypto Implosion
GK8 serves for instance of how traditional institutions can lean on crypto-native corporations for his or her expertise and prowess in navigating the sector’s ever-evolving threats. Many crypto corporations have spent years perfecting and battle-testing their products in anticipation of institutional use, which is what makes them stand out.
Crypto and blockchain products coming back right down to earth has translated into heightened authentic interest from massive institutions that may take mass adoption to a recent level. But with so many competing paths and uncertainties hanging within the air, it’s hard to inform what exact next steps institutions will take. Either way, preparation, knowledge, and trust are essential to foster an efficient and efficient working relationship between the normal and decentralized finance spaces.
