Tokenization has become one of the most popular buzzwords in the cryptocurrency space, but Zach Pandl, head of research at Grayscale, said investors should think of it less as a single deal and more as a long roadmap with different winners at different stages.
Speaking at the EthCC conference in Cannes, France, Pandl said the trend is still in its infancy. Tokenized assets — the process of using blockchain rails to settle, transfer and record ownership of various financial assets such as bonds, funds and stocks — are growing rapidly. However, its current size is US$27 billion, which still accounts for approximately 0.01% of the global capital market, which is only a small part. This number is expected to grow to nearly $19 trillion by 2033, according to BCG and Ripple.
Big banks and asset managers have recognized this opportunity. “Two things that institutions are aware of are stablecoins and tokenization,” Pandel said. But they are still trying to figure out where to allocate capital to truly benefit from these innovations.
From here, Pandl expects tokenization to unfold in stages, with different types of networks and models capturing value at each stage.
The first winners, he said, are likely to be projects that look more like traditional finance, not less.
“In the early stages of the tokenization process, you’ll see some successful things that look more similar to how the financial system works today,” he said.
This means institution-centric, permissioned systems that address real issues of privacy, identity, and control.
Pandl noted that Canton Network (CC), backed by Wall Street giants such as DRW, TradeWeb, Goldman Sachs and Nasdaq, is a potential winner in the early stages of tokenization.
He said it was a “perfectly reasonable investment” for investors looking for near-term traction, even if Canton’s approach represented only a “slightly different, slightly upgraded version” of today’s financial system.
second stage
The second phase of tokenization may be a hybrid model where we have both an institutionally owned blockchain and a globally shared state that are interconnected and communicate with each other. Avalanche (AVAX) is one example, which has hundreds of sovereign, enterprise-owned chains (called subnets) but are connected to a main layer-1 network.
In his view, Ethereum’s ether (ETH) is a bigger but slower bet. Pandel said he believed the market would eventually move toward “global decentralized finance,” but added that “the technology isn’t quite ready yet” and neither are institutions.
This makes ETH a more ambitious investment for those willing to wait a long time away from financial intermediaries.
There is also a game of picks and shovels. Pandl highlighted chain-agnostic service providers like Chainlink as another way to gain exposure, saying they could be “more visible” than some blockchains.
Learn more: How tokenized assets could become a $400 billion market by 2026
