The tokenisation of real-world assets (RWA) is experiencing rapid growth, with tokens linked to RWAs increasing by an average of 286% in the first quarter, according to a CoinGecko report. Furthermore, the total market capitalisation of tokenised US Treasury bonds recently reached an all-time high of $1.72 billion, according to data aggregator RWA.xyz. However, the global head of institutional capital at Polygon Labs believes this market needs to grow 50 to 100 times for traditional players to take an interest.
“Even though this represents a 50-fold growth over last year, $1.7 billion doesn’t matter to me at all. For this to be relevant and for me to be interested in this market, it needs to be 50 to 100 times bigger than it is now for me to actually want to spend my time trying to care about it and trying to enable, generate, and create something,” Colin Butler told Crypto Briefing.
Butler points out that one billion dollars for companies like BlackRock “is nothing at all”. Nevertheless, he sees the RWA market getting there soon, although he doesn’t know what “soon” might mean in terms of a timeline. “Does it mean twelve months? I don’t know. Does it mean 24 months? I don’t know. But I think massive progress will be made in the next three months.”
The optimism expressed by the leaders of Polygon Labs is linked to traditional players tackling “creative methods” that will become known in the next two to three months. “I think this gives a clear vision of the next steps that could make this project truly significant.”
Polygon technology is currently used by some players in the tokenisation of US Treasury bonds, such as Franklin Templeton, Ondo, and Swarm. Roger Bayston, head of digital assets at Franklin Templeton, stated that Polygon enables their tokenised fund to be compatible with Ethereum-based blockchains, acting as a gateway.
Butler highlighted this role for Polygon technology while adding that AggLayer will play an important role in unifying liquidity for various traditional financial institutions entering the blockchain industry.
“We can connect liquidity across multiple chains via an aggregation layer using zero-knowledge technology, thus creating unified liquidity across the entire blockchain space and settling on Ethereum. And I think that’s the infrastructure that will underpin a large majority of global finance in the future,” Butler explained.
AggLayer, short for Aggregation Layer, is a phase in Polygon’s roadmap where different layer 1 blockchains will be connected by leveraging the same layer. Consequently, various networks will be able to communicate seamlessly, which is what most institutions entering the blockchain industry are looking for.
“That’s what I currently see at the heart of all these discussions. That’s what I currently view as the standard for traditional finance and connectivity for financial transactions,” he added. It is also one of the biggest challenges for Polygon right now, as it needs to prevent liquidity from being trapped in different silos without connectivity.
It should be noted that the use of zero-knowledge technology is also important for financial institutions adopting blockchain because it can ensure the privacy of their transactions, which they also aim for. “This is, basically, being developed behind the scenes of the world’s largest financial institutions.”
Therefore, Polygon and other Web3 players are convincing traditional institutions that the blockchain industry currently offers interoperability, confidentiality, and scalability.
“What has been publicly announced actually represents only 1% of what will happen in the next twelve months in terms of impact on global finance. I would say there is a tidal wave of institutional capital about to flow into this sector, assuming they are all looking to transition to this technology over time,” Butler concluded.
