Is tokenisation the future of finance, or just TradFi in disguise?

We talk a lot about crypto innovation, but one of the biggest breakthroughs in tokenisation might still be flying under the radar. It’s not as flashy as memecoins or AI-driven trading bots, but its potential is massive.

Imagine a financial world where:

• You can send a friend shares of Apple stock as easily as a text.
• You can borrow against your S&P 500 ETF instantly, with no bank or credit checks.
• You can earn yields on tokenised U.S. Treasuries, no matter where you live.

Sounds futuristic? Maybe. But from a technological perspective, this is all possible.

What is tokenisation?

Tokenisation allows real-world assets, such as stocks, real estate, bonds, or even artwork, to be represented on-chain as digital tokens. These tokens can then be traded, transferred, or used in decentralised finance (DeFi) applications for borrowing, lending, and yield farming.

Today, your financial assets are scattered across multiple financial institutions. Mortgages sit in banks, stocks and ETFs live inside brokerage accounts, and crypto is held across centralised exchanges or in your own wallet. Tokenisation breaks these silos. Platforms like Backed Finance have already brought S&P 500, Nvidia, and Tesla stocks on-chain, making them usable in DeFi protocols. Imagine using your Apple shares as collateral to borrow stablecoins on AAVE without selling a single share.

Unlocking capital efficiency

Traditionally, unlocking liquidity from assets comes with limitations. Selling stocks can trigger capital gains tax. Taking out a loan requires bank approvals and credit checks. Margin trading is risky and comes with high interest rates.

Tokenisation changes the game by allowing instant access to liquidity without selling assets or dealing with lengthy approval processes. Borrowing against tokenised stocks, ETFs, and real estate could become as seamless as using crypto in DeFi today.

Challenges holding tokenisation back

Despite its potential, tokenisation still faces major hurdles before going mainstream.

1. Regulatory uncertainty – In many jurisdictions, depositing assets into a lending protocol could be a taxable event, and compliance requirements add complexity. 

2. Slow adoption – DeFi has not fully lived up to its 2021 hype cycle, and traditional investors remain sceptical. 

3. User experience barriers – DeFi remains complex and intimidating for mainstream users. Until the user experience improves, adoption will be slow. 

4. Liquidity constraints – Traditional assets are not natively digital, and a truly liquid market for tokenised stocks and bonds does not yet exist. 

Is this DeFi or just TradFi on a blockchain?

For tokenisation to work at scale, regulated institutions must issue and back these assets. This means tokenised assets are still tied to traditional financial systems. Investors need to trust centralised issuers like Backed Finance or banks. Compliance requirements prevent it from being fully permissionless.

It’s clear that tokenisation is not fully DeFi yet. Right now, it’s more like TradFi with blockchain rails. But as DeFi evolves, we could see more permissionless, decentralised models emerge.

Final thoughts: Would you borrow against your stocks?

If tokenisation scales, it could revolutionise wealth management by making assets more liquid and accessible. The technology is here, but regulations, adoption, and liquidity challenges remain the biggest hurdles.

Would you borrow against your assets if it were this easy? Or does this still sound too far-fetched?

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