ParaFi Capital has ventured into the world of tokenization by partnering with Securitize, a platform for tokenizing real-world assets, to tokenize a portion of its over $1 billion in assets under management on the Avalanche blockchain. The firm, renowned for its substantial crypto investments, is also a prominent investor in projects and infrastructure specializing in real-world asset tokenization. Earlier this year, ParaFi was part of a $47 million funding round for Securitize, led by global asset manager BlackRock.
Tokenization Offers Major Benefits
Ben Forman, the founder and managing partner of ParaFi, highlighted the numerous advantages of tokenizing private market strategies. These benefits include streamlined settlement processes, reduced legal and administrative costs, improved liquidity, programmability, and cross-margining in the long term. "ParaFi has been actively investing in companies specializing in traditional asset tokenization globally," Forman stated.
“However, our firm doesn’t solely want to be passive investors in this technology; we want to use it ourselves. That is why we decided to take the initial step of tokenizing a portion of our latest venture fund,” he added.
The tokenized fund will be tradable on the Securitize platform, providing investors with borrowing and lending options while broadening ParaFi’s investor base beyond institutional investors. Avalanche was chosen due to factors such as ethereum Virtual Machine compatibility, sub-second transaction finality, low fees, and a growing ecosystem of tokenized assets.
Avalanche’s Tokenization Ecosystem Grows
The tokenization ecosystem on Avalanche continues to expand, with notable developments like Franklin Templeton's expansion of a $419 million on-chain money market fund onto the network. The Avalanche Foundation's Vista initiative has allocated $50 million to incentivize asset tokenization on the platform.
John Wu, president of Ava Labs, emphasized the need for innovation in financial markets and highlighted recent advancements in financial asset evolution through blockchain and tokenization. Securitize, managing over $950 million in tokenized investments, has collaborated with major players like BlackRock and KKR.
Reports suggest significant growth in tokenized financial assets in the coming years. McKinsey & Company predicts a $2 trillion market size for tokenized assets by 2030, while the GFMA and Boston Consulting Group estimate the global value of tokenized illiquid assets to reach $16 trillion by the same year. Citigroup's conservative estimates indicate $4 trillion to $5 trillion worth of tokenized digital securities could be minted by 2030.
Noteworthy industry players are making strategic moves in the tokenization space to capitalize on this potential. Goldman Sachs, for instance, is set to introduce three new tokenization products later this year in response to increasing client interest.
