ParaFi Capital has announced a partnership with Securitize, a leading platform for real-world asset tokenization, to tokenize a portion of its $1 billion in assets under management. The tokenization will take place on the Avalanche blockchain, chosen for its compatibility with Ethereum Virtual Machine (EVM), low fees, sub-second transaction finality, and expanding ecosystem for tokenized assets.
Known for its significant investments in the crypto space, ParaFi is also a major backer of projects focused on real-world asset tokenization. In line with this commitment, ParaFi participated in a $47 million funding round for Securitize earlier this year, alongside global asset management giant BlackRock.
Benefits of Tokenization
Ben Forman, founder and managing partner of ParaFi, emphasized the transformative benefits of tokenizing private market strategies. These include streamlined settlement processes, lower legal and administrative costs, and the potential for greater liquidity, programmability, and cross-margining in the future.
While ParaFi has been an active investor in asset tokenization technology, the firm aims to move beyond passive investment by utilizing the technology themselves. “That is why we decided to take the initial step of tokenizing a portion of our latest venture fund,” Forman said.
Expanding Investor Access
The tokenized portion of ParaFi’s fund will be traded on the Securitize platform, offering expanded borrowing and lending options for investors. This move also opens up ParaFi’s investment opportunities to a broader audience, reaching beyond its current institutional investor base.
Avalanche’s Growing Tokenization Ecosystem
Avalanche’s ecosystem for tokenized assets has seen significant growth, with major developments like Franklin Templeton’s $419 million on-chain money market fund expansion. Additionally, the Avalanche Foundation’s Vista initiative has allocated $50 million to incentivize asset tokenization on the platform. John Wu, president of Ava Labs, praised the ongoing innovation in financial markets driven by blockchain and tokenization.
Securitize’s Industry Impact
Securitize currently manages over $950 million in tokenized investments and has previously collaborated with top-tier institutions such as BlackRock and KKR. BlackRock’s tokenized USD Institutional Digital Liquidity Fund, developed in partnership with Securitize on Ethereum, now holds $515 million in assets, marking the largest tokenized U.S. Treasuries fund to date.
Growing Market for Tokenized Assets
Despite a slow start, tokenized financial assets are expected to grow significantly. McKinsey & Company predicts the market could reach $2 trillion by 2030, while estimates from Citigroup suggest that $4 trillion to $5 trillion worth of tokenized digital securities could be issued by that time. Some forecasts are even more bullish, with a report from the Global Financial Markets Association (GFMA) and Boston Consulting Group projecting the global value of tokenized illiquid assets to reach $16 trillion by 2030.
Recognizing this vast potential, companies like Goldman Sachs are gearing up for further tokenization initiatives. Goldman plans to launch three new tokenization products later this year, signaling growing client interest in the space.
