RWA Tokenization: What Asset Classes Will Work—and Which Won’t | DC Fintech Week 2025

assets is maybe one of the largest and and uh most exciting areas of uh onchain finance. Uh I mentioned earlier in a panel that Larry Frink spent most of his time talking about real world asset tokenization. Uh I found that fascinating in and of itself that in a 30-minute interview so much of his time was devoted towards even thinking it through. Um in this panel we're going to dig a little bit deeper since we have so many uh really leading experts both in terms of market infrastructure but also from the regulatory standpoint. I'm going to let everybody do uh starting with Sarah to do their sort of name rank serial number uh descriptions of one another and then we're going to hop right into the topic.

So Sarah,

thanks. Uh Sarah Breeden, deputy governor uh financial stability at the Bank of England and responsible for our work on innovation and stable coins. Hello everyone. Ebony Thompson, city solicitor for the B for the city of Baltimore. Uh basically just means that I head the law department and I've been spearheading a pilot for us to record uh over 228,000 of our properties on Black.

Good afternoon. I'm Peter Hughes, CEO and founder of Apex Group. Uh we are a large asset service in 52 countries. Okay, great. So, as you can see, oh man, I'm Edward.

I'm sorry, man. I'm sorry. No introductions, but it was the great British accents that were lulling me into Yeah,

sorry. Very quickly, Edward, CEO and founder of Zero Hash. Uh, we provide stable coin tokenization and crypto infrastructure to um all sorts of financial institutions.

I was also thinking about some of the legal questions in the background about this. Okay, so let me just hop into this uh first with Sarah. So when you think about things um particularly from your perch and I love that you know your dual role I mean supervision and innovation that's a very unusual sort of confluence of responsibilities over the bank of England um uh tokenization is obviously packaged in the conversation about uh markets and market efficiency uh but there are lots of different kinds of RWAs um where do you see the strongest use cases for real world assets and uh since you have two hats uh that you wear where are the risks that you see uh to be the most worrying worrisome. So great question uh and I can see use cases in many different places retail payments wholesale payments crossborder uh payments but in this context uh settlement of financial market instruments at the bank we launched with the FCA our markets regulator a digital securities sandbox last year that provides a regulatory framework for the private sector to come and set up trading ing venues and settlement systems for tokenized assets. Now, this is exciting because we're bringing real use cases for real world transactions in tokenized securities.

Now, although it's called a sandbox, it really isn't. These are real live transactions. They're not prototypes. They're not experiments. Uh we've got 15 firms in the sandbox uh so far and counting it's the established firms like Uracleair, HSBC, JP Morgan

never heard of

but the small guys uh as as well and what they're doing is setting up infrastructure to to trade tokenized equities, corporate bonds, government uh bonds and I think you all may know the UK government is planning to issue a digital tokenized government bonder guilt into the uh sandbox uh likely uh next year. And what this will do is create faster, cheaper processes in financial markets, fewer intermediaries, less operational risk, shorter settlement windows, and smart contracts automating processes like coupon uh payments. It's really good to see this happening real live. Now the main risk I worry about perhaps we can come on to this later uh so I don't take up too much now is ensuring that we have the right cash leg what is the settlement asset that has the requisite safety and functionality to play the role of money in tokenized transactions. My view is that central bank money, our liabilities must remain the settlement asset for the most important transactions in uh financial markets even as we see greater uh tokenization.

That way we're not introducing potentially precarious and unnecessary interconnections in the financial system and to the other part of my job the financial stability risks. And that's why in the UK we've launched a modernized wholesale payment system uh RT2 as it's known uh this year. Now we don't need central bank money for all transactions but having that platform there is helpful.

Well that there was a lot in that and and and

we're doing a lot. I get really annoyed when people think the UK is behind anyway [laughter]

and relax. [snorts] Yeah. Uh, you know, I I I I think, you know, when you when you when you that that scope of action was was was was really interesting and I am going to get back to both the the risk element and and still the continuum of that conversation as to what exactly is the settlement asset. And I already can hear in your answer frankly some evolution over the last couple years from central bankers about how do you frame that question and what your analytical lens is going to look like. But every, you know, uh, Ebony, I'm I'm so happy to have you here as well.

So over at DC Fintech Week, what we really enjoy is having great perspectives from different sort of use cases. Uh in the past, people who have been to the event will know, I mean, we've had everyone, we've even included like epistemologists on what is the nature of reality. We really have people loved it uh in terms of you know, online digital um transactions. Your experience is very concrete, right? you know, you're you're you are the solicitor for the city of Baltimore and you went on uh a project of trying to tokenize truly tokenize real world assets.

Can you give us a little overview as to what that project was and and what was your objectives in in in the city's lawyer thinking about digital assets?

Absolutely. Excellent question. So, this came about actually my first day um with the city in January 2022 where we had a press conference and we were unfortunately um discussing uh three firefighters that lost their lives uh battling a vacant property um in Baltimore City and it just collapsed on them um and they lost their lives and Mayor Scott uh took this problem uh at that time we had as high as 17,000 vacant properties um and he said I want uh concrete um ideas and I want everyone to bring their ideas. I don't care what agency you're from. And that is what gave the law department an opportunity to weigh in on what we believe is not only just a housing issue but a public health issue.

And I proposed to them that we would a record our properties on blockchain. And it started out with our vacant properties, but it uh it was so popular um that we did the majority of our properties over 228,000 we have and now with the hopes of tokenizing them and I I know we'll go into that a little bit later, but it was it was really a about really combating a public health crisis. And then at the same time, of course, nationwide Baltimore is no different than that. We have affordable affordable housing crisis as well. Um, and we saw that these vacant houses were sources of blight, uh, sources of crime.

Um, so they were connected to everything. And we were looking at, we couldn't say we were going to be serious about solving this problem if we weren't going to utilize every tool that was available. And we thought that blockchain was a critical tool, not the silver bullet, but as a if you build around that, that is one piece to allow us to tackle this problem. And uh, we're down to under 12,500 in in in and and and in trying to drive that number down. But um that's that was the uh the source of how uh the head of the law department uh came to uh spearhead a a a project in housing.

Yeah. It's almost as as kind of unusual as you'd think if you had like a central banker doing supervision who was interested in innovation. I mean I mean what are they going to come up with next? Um so you know when you are just sort of getting a sense I think as to sort of how these issues are seeping into different policy um uh areas and and Peter you know coming to you now um Apex is a major uh company works across lots of different asset classes and and and and services um uh I've traveled around a lot uh recently in in opening up uh you know conferences in the Middle East and and in and and in Latin America. And one of the things that both regulators constantly are are telling me, but also financial market participants is that they look at what should be tokenized based off of, you know, national advantage, relative advantage, economic advantage, but also where the market um is in terms of their ability to take on on board uh and understand uh different products.

So when you think about credit, commodities, real estate, uh they're all showing different forms of momentum, different parts of the world. Um but how much of it is real in real world assets? Where do you see the hype? Where do you see the possibility? Where do you see the u practical uh of shots?

Yeah, I think it's difficult. Uh you there is a bit of hype out there and it's great to see a real use case making a difference. Um, you know, in in our world, you know, we we deal with a lot of asset managers globally and they're trying to, you know, tokenize whether it's assets in their portfolios or tokenize their fund shares to create extra distribution. Um, and you a lot of these projects are really the smaller end of town. So, you they don't actually get the critical mass because they haven't got the institutional branding behind them.

Um, but just really in the last sort of uh four or five months, you know, we have a part of our business called Apex Digital, which is everything we do on chain. um you know that has just really expanded from 30 opportunities to 150 in the last three months and mostly it's around really what other asset managers trying to do to enable their distribution to be reformatted. Um so reformatted I mean with a tokenized money market fund instead of being a normal money market fund this trades 247365 so you can imagine the value of actually that that yielding all the time uh onchain and then you can collateralize against that. So some really strong use cases and we've got some really big institutions looking at that now because of the perpetual trading but also the collaterization piece to it. Um you there is a real shift I think to to thinking about how do you we for example take a leading asset manager in their private credit fund.

You know I I can't invest into a Black Rockck private credit fund. It's a $5 million subscription. You get your money back in 10 years time. Um that's disappointing because actually it's quite a good product. But actually, if you can tokenize that and get that onchain and a $10,000 subscription, everyone can participate in that.

And I think that's going to be really valuable. But it hasn't happened yet. It it's about to happen. And you get DeFi exchanges are happening to be able to trade these tokenized solutions. Um, so it's when it becomes institutionalized and what we call that is digital assets rather than what people are used to talking about, which is crypto, which is for the retail, the retail trading.

and we're trying to institutionalize, move it away, make sure there's clean AML across everything we do. Then it'll be used by corporates, you know, wealth wealth managers, retirement, even ultimately when regulators are comfortable, retail, uh, and that opens up huge doors into new markets and and and the hypy areas. So we we we we we're hearing is is the hype if there's hype is I think that's that's that's that's a a good question you know like if there's hype where exactly it it resides and the reason why I'm asking again yes because this again Larry Frink droning on on on securization tokenization real world assets is so unusual uh because he was all for it um where do you think people get over over their skis

just with assets that they can't actually sell they're trying to put into a different form so you get tokenized Yeah, wine, art, whiskey, you know, those sorts of products where, you know, it's not really legitimate in my mind.

Great. Well, then that gets to a great question CEO of Zero Hash uh to ask um Edward here. So, what are the attributes in your view then as to sort of uh products that are best for tokenization? What are the kinds of things that you strategically think about?

Yeah. So [clears throat] I think what's really important in this discussion is that we don't view tokenization and non-tokenized assets as um binary. These things can move between one and the other. So I'll make that really tangible for you. So with stable coins, I believe that they are the most powerful mechanism to move money.

what you may term money in motion but objectively right now in the US if you are able to hold a dollar balance uh money at rest effectively um a dollar balance a non-tokenized representation is objectively better for pretty much every person in this room the reason why in the US you will not be able to earn interest on that uh tokenized dollar you are taking private credit risk against a company as opposed against to the US government and um you're you're not insured on those balances so I think that this distinction of what is powerful around tokenization and what's not. I really think it needs to be less binary. Um clearly with a dollar uh the ability to move 24/7 365 instantly anywhere in the world is incredibly powerful and that's where we've seen a huge uptick. So, one of our fastest growing products is what we call our account funding product.

And this allows people to move money into, for example, regulated clearing houses or regulated broker dealers or indeed regulated funds like Bidd and Franken Templeton that we power. The ability to move that from anywhere in the world, 365. Um, and that's incredibly powerful as you see the drive of tokenization, you see the rise of 24/7 marketplaces. So for me it's about when in the life cycle of an asset does it make sense to be tokenized and I think that that that matters and where we're seeing where it really matters is where you need to move value instantly globally 24/7 365 cheaply.

Super interesting helpful um uh information. I guess I'll I'll I'll shift it back to you uh Sarah particularly when listening to this and for that matter uh Governor Waller who had sort of interesting comments to make about European approaches to uh crypto assets. um you know what what kinds of of policy frameworks and guard rails help to enable uh what Edward's uh sort of pointing to and and what do you think uh is really necessary if tokenization is going to again looking at your dual mandate here is going to scale quickly but also address some of the risks that you were intimating in your first uh set of comments. So what's absolutely fundamental here, Chris, is that we have safe and functional settlement assets that can support the activity that we've just uh been talking about. In some wholesale markets, settlement in central bank money is uh important for financial stability, but in other markets, tokenized deposits and stable coins have got an important role to play.

But it's on us as the regulator to make sure that those stable coins are safe. One of the things that we have been uh focused on as we've been designing our regime for systemically important stable coins, those that are used widely in the economy, is to make sure we're designing a regime that's fit for the future uses, not just the current uses. So supposing these uses take off, they're widely used, kind of how do we make sure that money is safe. So what we've been doing at the Bank of England is offering to be the banker to the coin. The coin doesn't have to go and try and uh put its uh balances with the institutions it's competing with.

It can place its money with us. We're offering to be a lender of last resort for it so that we can be confident that the pound in the stable coin is worth the same as a pound in a bank account, a pound of central bank money, a pound of tokenized uh uh deposits. And I think that is really important for ensuring that as these coins scale, they are able to perform the function of of money. We could have a less uh a different regime to start with, but I would worry that as they scale, we would then want to change the regime. And as we've learned in uh technology all over the place, retrofitting regulation as use takes off does not work.

So, we're setting out a regime now that's fit for the future.

Retrofitting regulation doesn't work. That's that's I don't know maybe fits on a t-shirt but pretty darn close. Uh very interesting. So you again I like to make these things very very tangible and and Ebony like you know when you're sitting here as the lawyer for the city of Baltimore right and you're hearing all these conversations you have a much more tangible sort of riskreward calculation that you have to make right you know on the one hand you can talk about financial markets but you're also talking about real world applications of real world assets right how exactly did you go about thinking through and even implementing the uh uh you know putting these blighted assets on chain What efficiency gains were you looking at? And from the risk perspective, uh were what if any sort of questions were in your mind?

I mean, obviously for a a lawyer to hop into crypto assets or real world assets couldn't have been that easy.

Oh, absolutely. Uh I I won't disclose how many people laughed at me when I brought up this uh [laughter] when I brought up this idea. Um and it nonetheless coming from a lawyer, their top lawyer. But when I saw the need where we're looking at these vacant properties, we have 17,000 of them and the majority of them are not owned by the city. So we had to first uh implement a in rim track within the circuit court so that we could actually get these through the process of ownership so that the city could actually handle it faster than the foreclosure market which would be two to three years.

Whereas in rim are properties that are underwater meaning that they have more leans than they are worth. Right? So the so the amount of time we were able to cut that from uh two to three years, take them off to four to six months. So we're saving time there. The other piece where we were saving time is since the the the city doesn't own that property and they have to acquire it, we're not in the business of rehabbing the property.

We still have to resell it to an investor and then that investor is going to rehab it and then sell it to the end user or the landlord. So our properties are changing hands relatively quickly, three times within maybe a year, year and a half. So, why are we doing title searches each time, right? Why are we not looking forward um instead of going back 50 years every time we have to do that? Especially when you have a housing crisis and you have a blight problem and you have 17,000 that you're trying to drive the number down.

It just didn't make sense. Um especially legally um I was like this is this doesn't make sense. So, in terms of the efficiencies, the government could get behind that. And I think when you present especially municipalities where I think if you're looking at mass adoption, you're going to need municipalities and counties to jump on this. Um you have to look at where they are hurting, right?

And this is something this is something that that's concrete that everybody could get behind. But then as you expand because that's not where I wanted to go. I wanted that just to be the beginning. We know that um we know that Baltimore is the uh birthplace for redlinining. Um, and we know that a lot of these 17,000 properties, the majority of them are in these disinvested neighborhoods that have suffered from decades of banks not lending to them.

And what we want to do is we want to ensure that the same abuses are not repeated as we come up with products to combat that problem. So to to build those guardrails and to be able to be usually on a lawyer, it's like on the back end like when we have the opioid settlements and we have record settlements for opioids, record uh settlements for ghost guns, the lawyers now are transitioning now to encode it on the front end the rights and the responsibilities um on the front end. So we can say that local investment is first. The people that have been disinvestment and and and and lived through that for decades have the opportunity first and we can encode that in the beginning. Um and and and then uh we we're we're we're basically encoding equity and uh that not only helps us with our issue in terms of the blight, but it also helps us in terms of the disinvestment that we're suffering from in the city as well.

Yeah, it's going to be really interesting because like you because I think you're really on the earlier end of things, but like ultimately if you really try to tokenize that asset, you know, to think about what uh you know, you're sort of hinting at what liquidity looks like, but but ultimately you're going to need um you know, more even more infrastructure to support that and and I and and to really get it get it going. Um I think just big meta question um for for Peter is that you I think right now and you see it whether or not it be with Ebony's work whether or not you it's Sarah's work over at the Bank of England whether or not you see it with other smaller projects um you know in the sandbox and and the like there's this question of experimentation and how do you sort of tinker with this new technology tinker with tokenization in a way that ultimately uh allows you to move past a pilot into broader adoption for real world uh usage and also for financial markets for for for trading collateralization and and the like. Um do you think that that tipping point is going to be driven by technology clarity on the regulatory end because we're getting some now you know uh or is it some kind of new market demand? How do you weigh each of those sort of different drivers?

Yeah, I think it's mostly regulatory, you I think once the technology exists, but I think people have built products you traditionally for the for the retail side of things, you know, evolving from the crypto space, whether it's it's, you know, some really good stable coins like USDC that was, you know, that's that's on unpermissioned chain, uh, and it's got a proof of reserve monthly. Well, that's that's a retail product. Actually, if regulators then evolve that to say, well, actually have a daily proof of reserve, so you know the assets are sitting there. It's on permission chain so you know it's clean money going through it absolute constant AML around that then that becomes a quality product that can be used for corporate treasury and I think that that's the inflection point it's just that just little lift will allow regulators to feel comfortable that it's safe uh and and that's not much I mean the technology exists to do it uh and it's just a little tweak and then once I believe in five years time the corporate treasury will all be stable coins of different types um you know And yes, there are some people out there who think it should be Bitcoin. I'm not one of those.

Um, but stable coins absolutely, especially if they're yield bearing and that that's coming through quite quickly. Can I just but I'm supposed to only ask questions but to maybe an observation one thing that I've seen is that the financial institutions themselves even if the a liquidity pool is unregulated even if it's vignia is unregul like the financial institutions are right and even if there's no explicit permission or lack thereof there are operational risk charges that can apply to the financial institution in terms of how they either you know custody collateralize or whatever whatever they're doing there are these kinds of things that are in in the back of their head regulatory clarity or not. And I kind of to double click on that. I think um providing the clarity is useful whether or not things are you know explicit or not. The financial institution if you want to institutionalize the the the trading in the markets you you know that seems to be super important.

We actually do have a little bit of time don't worry uh for you at um it's built in. It's built in. Uh okay, I'm going to try asking this question um from another another vantage point. Um what real world asset will ultimately be mainstreamed first given this question of regulatory clarity? Um and also five years from now does that change?

In other words, does the leading position of what is sort of let's call it the anchor real world asset. Do do you expect to see uh let's call it the market reality catching up with the reg wherever the regulation ends up first or second eventually the best use cases are going to accelerate.

Yeah. So maybe just dovetailing on the regulatory point. I think what's really important is [clears throat] looking back at history. So, one of our largest investors is Interactive Brokers. And Thomas, the founder, made his money effectively um uh by uh the electronification of markets.

And when he first started, they literally did not want algorithmic trading. So, what he built was a finger that would plug things in more quickly because that wasn't written into the rules, right? So, we were fearful of electronification. We're always fearful of technology to some degree because it's unknown. Um so, I think what the SEC has done in the US is really great.

the underlying uh database doesn't ultimately change the underlying and I think that's a really important piece and regulators um it's not just law making which matters it's also the implication that regulators give right um what I think happened over the last few years in the US was regulation by rulem regulation by enforcement and regulation by implication so these three things have all been pulled back and I think that the US is in an unbelievable position to take the lead I would say that we're not in a hypothetical world, right? Dollars are tokenized and maybe this will just prove a point. So dollars, they use tokenized dollars are used in all around the world. We we're all excited we keep talking about them, but let me talk to you about the user experience as it exists today. Today, you have to decide on how many chains are um so you have to decide which stable coin do you want to send somebody.

So if I'm sending you a stable coin, do you want USDC? Do you want USDT? That choice is going to explode. Number two, on what chain do you want it on? And then thirdly, I need the native asset um to send that and then that needs to be interoperable interoperable with the asset that you want to receive and also the chain that it needs to be received.

So the UX friction today the usability is super high

and despite that stable coins have grown significantly. So that I think proves the value proposition and as we I think the biggest impediment to growth across all of the applications whether it be dollars or tokenized your bearing instruments is usability. As we bring the usability frictions down the adoption of this is going to explode even more and it's going to accelerate even quicker.

Can I be really cheeky? We have like spinner guy like he's like super powerful like

one one thing interoperability ensuring things can interoperate with one another will help drive down those frictions. Second thing the more the regulators and the private sector work together the more that we convene and try and look at practical use cases the quicker we'll be able to move. Well, it's good because as I moved right now to FINRA, I didn't know if I wanted to use the word explode as like the last thing to uh for for our conversation, but this was really interesting, extraordinarily informative. Um, right now I am delighted as we move off stage to welcome AWS's own Olivia Peterson. She's the person who literally made all this available to us uh and just uh was was a treat.

and she'll be with Greg Rubbert, the executive vice president at FINRA, uh who is also uh hosting their own piece of DC FinTech week on October 17th, uh which is great and it's called Investing in a World with Social Media Influencers. So, I guess we'll all now move off stage and welcome the next uh session. Thank [applause] you.