Fragmented Markets To Unified Solutions: How Tokenization Could Reshape Finance
By Benzinga
Tokenization could redefine institutional investing, but there are obstacles to adoption, according to Franklin Templeton‘s David Alderman.
During a panel discussion at Benzinga’s Future of Digital Assets Alderman joined Jennifer O’Rourke of DTCC Digital Assets to discuss the opportunities this technology presents, and the potential for a more connected market.
Tokenization Opens Doors for New Strategies
Alderman highlighted the growing interest in tokenized assets, which allow institutions to diversify portfolios and streamline transactions. “The tokenization that we’ve seen over the past year… is still very, very much in the early stages,” he explained.
See Also: A New Era? How Tokenization Could ‘Reduce Frictions And Potentially Costs’ In Finance
Despite the challenges, Alderman emphasized that institutional investors are eager to engage. “Most institutional investors… would like just to have some sort of allocation to crypto,” he said, explaining that tools such as index products could help investors achieve broader exposure to digital assets.
Liquidity Fragmentation Hinders Progress
O’Rourke drew attention to a pressing issue in the digital asset space: fragmented liquidity. “What we’re left with is essentially this federated system of a fragmented marketplace that needs to be connected with some standards or infrastructure,” she said. She explained that These isolated liquidity pools limit the scalability of tokenized assets and hinder their use as investment tools.
She also discussed ongoing efforts by global organizations to address these inefficiencies. Projects from groups like the Bank for International Settlements aim to create a framework that could unify the digital market. She noted that the focus must remain on connecting these fragmented systems into cohesive networks to unlock their full potential.
Regulatory Uncertainty Shapes the Market
Both panelists acknowledged the impact of regulatory ambiguity on altcoins and tokenized assets. Alderman noted that fear of classification as securities has prevented some projects from fully developing their utility. “A lot of crypto protocols… have been terrified to add utility or some sort of value accrual mechanism to their token,” he said.
O’Rourke emphasized the importance of clarity, explaining that the current environment requires companies to innovate while managing uncertainty. “The work that we’re doing today prepares us to be able to execute as those considerations fall into place,” she said.
Building for a Connected Future
Despite current challenges, the panelists expressed optimism about the path forward. O’Rourke highlighted the importance of long-term planning, urging the industry to build solutions with an eye on scalability. “What you’re building today should have some path to a future scaled utilization,” she explained.
As tokenization matures and altcoins gain traction, institutional investors will likely find new opportunities to diversify and enhance their portfolios. However, achieving these benefits will depend on overcoming market fragmentation, improving infrastructure, and navigating regulatory challenges. The panel provided a roadmap for addressing these obstacles, setting the stage for a future where digital assets are integral to institutional strategies.
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