Larry Fink has come a long way in digital assets since the crypto bull run of 2017 when he described Bitcoin
Bitcoin
as an “index for money laundering.” Fast forward a few years and Fink is now one of its most vocal (and influential) proponents, with BlackRock among the first to embrace the Bitcoin spot ETFs that launched earlier this year.

BlackRock’s newfound passion for digital assets doesn’t stop at Bitcoin. Earlier this year, it was reported that its new Ethereum-based tokenized sovereign wealth fund had captured about a third of the $1.3 billion market within just two months of its launch.

There is more joy in heaven over the man who realizes his error than over the 99 who were right all along. But Fink’s conversion is hardly religious in nature; like any hedge fund manager, he is motivated by mammon. The financial opportunities of tokenization are out of this world; earlier this year, a McKinsey report predicted that the tokenized real-world assets (RWA) sector will reach nearly $4 trillion by the end of the decade.

These are many good reasons to bet on the tokenization of finance. But that only partially explains why BlackRock (and many other large institutions, from Deutsche Bank to JP Morgan) are so passionate about embracing digital and tokenized assets. The truth is that tokenization changes everything.

Tokenization – the new paths in global finance

A Forbes audience won’t need much of an introduction to tokenization or how it works, but it’s worth recapitulating what it is. means. It is the foundation for new asset classes, new markets, a world of new financial opportunities – not just for trillion-dollar hedge funds, but also for all.

The ability to potentially convert any real-world asset into a digital token creates a new superpower for investing: the ability to fractionalize “monolithic” assets.

Fractionalization allows anyone to own a share, however small, of things they could never have bought themselves – from luxury real estate to an old master painting. Tokenization is not just for physical assets. For example, some of the most exciting developments involve the tokenization of personal loans (including SME loans). This market alone has grown by 39% to reach $8.9 billion in 2024.

All of this is great news for individuals – especially for first-time investors investing on a small scale for the first time – but the macroeconomic implications are even more serious. By opening up and making asset classes tradable to new groups of investors, tokenization massively increases liquidity in these markets, while increasing speed, increasing capital efficiency and removing friction in all types of financial transactions. This, in turn, helps make the global economy significantly more resilient and better able to weather the kinds of shocks we saw in the first two decades of this century.

Therefore, tokenization should not be viewed only as an individual investment, but as a new paradigm for markets and transactions that will quickly replace old, inefficient financial systems and practices.

The best historical analogy to today’s “tokenization moment” is the development of the railroad in the 19th century. These massive infrastructure projects, which ran through mountain ranges and crossed mighty rivers, transformed societies in ways that even their most zealous backers could hardly imagine. Not only did they shorten travel times for freight and passengers, but they also brought about enormous economic, political and social changes. After the railroad, nothing was the same again.

The same goes for digital assets and tokenization. These technologies are the financial rails of the future, and investors like BlackRock are the modern equivalents of Cornelius Vanderbilt, Jay Gould and – of course – the original JP Morgan. The descendants of the great financier are now seizing the opportunities offered by the digital asset revolution; for example, through Onyx, which JP Morgan says is the world’s first bank-led blockchain platform for exchanging value, information and digital assets.

Shaping the future

Like the railroad builders of yore, there are many hurdles to overcome before tokenized assets can realize their potential and transform the world of investing and financial services. There are many tricky issues to solve, from secure custody at an institutional level to ensuring regulatory clarity and acceptance.

While there has been great progress so far, much of it is piecemeal – for example, different jurisdictions have wildly different approaches to regulation. This means that some countries are fast becoming hubs for digital assets, while others risk becoming outlying places. This delays the full, transformative promises of tokenization that can only be achieved if the benefits are truly universal.

However, the direction is becoming increasingly clear, especially with the emergence of new frameworks such as the European Union’s Markets in Crypto-Assets Regulation (MiCA). These provide both much-needed clarity and guidance for those driving the tokenized future, and a model for still-skeptical regulators such as the SEC.

Given the financial opportunities presented by the tokenization revolution, it is only a matter of time before all remaining obstacles are removed. There are at least four trillion reasons why tokenization will take hold by the end of the decade and be adopted by everyone from companies like BlackRock and JP Morgan to ordinary citizens, changing the world in ways we can barely imagine.