If you invest in crypto, you cannot say you’ve done your research unless you’ve read this thesis on tokenization, published by Larry Fink today in the annual investor letter for BlackRock, the worlds largest asset manager.
For context, BlackRock manages over $11 Trillion in assets and is one of the top shareholders in just about any company you’ve ever heard of. They led the launch of Bitcoin ETFs followed by Ethereum ETFs. They launched their BUIDL fund for on-chain asset management, which has already surpassed over $2B in AUM on Ethereum.
Do yourself a favor and read it below:
Tokenization is democratization
The world’s money moves through plumbing built when trading floors still shouted orders and fax machines felt revolutionary.
Take the Society for Worldwide Interbank Financial Telecommunication (SWIFT). It’s the system that underpins trillions of dollars in global transactions every day, and it works much like a relay race: Banks hand off instructions one by one, meticulously checking details at each step. That relay approach made sense in the 1970s, an analog era when the markets were much smaller and daily transactions were much fewer. But today, relying on SWIFT feels like routing emails through the postal office.
Tokenization changes all that. If SWIFT is the postal service, tokenization is email itself—assets move directly and instantly, sidestepping intermediaries.
What exactly is tokenization? It's turning real-world assets—stocks, bonds, real estate—into digital tokens tradable online. Each token certifies your ownership of a specific asset, much like a digital deed. Unlike traditional paper certificates, these tokens live securely on a blockchain, enabling instant buying, selling, and transferring without cumbersome paperwork or waiting periods.
Every stock, every bond, every fund—every asset—can be tokenized. If they are, it will revolutionize investing. Markets wouldn't need to close. Transactions that currently take days would clear in seconds. And billions of dollars currently immobilized by settlement delays could be reinvested immediately back into the economy, generating more growth.
Perhaps most importantly, tokenization makes investing much more democratic.
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It can democratize access.
Tokenization allows for fractional ownership. That means assets could be sliced into infinitely small pieces. This lowers one of the barriers to investing in valuable, previously inaccessible assets like private real estate and private equity. -
It can democratize shareholder voting.
When you own a stock, you have a right to vote on the company’s shareholder proposals. Tokenization makes that easier because your ownership and voting rights are digitally tracked, allowing you to vote seamlessly and securely from anywhere. -
It can democratize yield.
Some investments produce much higher returns than others, but only big investors can get into them. One reason? Friction. Legal, operational, bureaucratic. Tokenization strips that away, allowing more people access to potentially higher returns.
One day, I expect tokenized funds will become as familiar to investors as ETFs—provided we crack one critical problem: identity verification.
Financial transactions demand rigorous identity checks. Apple Pay and credit cards handle identity verification effortlessly, billions of times a day. Trade venues like NYSE and MarketAxess manage to do the same for buying and selling securities. But tokenized assets won’t run through those traditional channels, meaning we need a new digital identity verification system. It sounds complex, but India, the world’s most populous country, has already done it. Today, over 90% of Indians can securely verify transactions directly from their smartphones. The takeaway is clear. If we're serious about building an efficient and accessible financial system, championing tokenization alone won't suffice. We must solve digital verification, too.
