During a speech to Congress, a financial law professor expressed skepticism about the ability of public blockchains to effectively tokenize trillions of dollars in real-world assets. Hilary Allen, a professor at the American University Washington College of Law, argued that these blockchains are too “fragile” and inefficient to handle such large transaction volumes.
In her address to the United States House Financial Services Committee on June 5, Allen emphasized that while cryptocurrency operates on permissionless public blockchains, tokenization does not necessarily require the same infrastructure. She highlighted her disappointment in blockchain technology, which she initially believed would be revolutionary but later realized was limited and problematic.
Describing herself as a “pessimistic financial futurist,” Allen criticized public blockchains as being ill-suited for solving the majority of problems they aim to address. She pointed out that these blockchains struggle to process large amounts of transactions, despite notable instances of billion-dollar transfers on platforms like Bitcoin and Ethereum.
While acknowledging the potential for other ledgers and databases to be more suitable for tokenization, Allen did not advocate for any specific technology. She cautioned against hasty deployment of tokenization and emphasized the need for careful consideration in this regard.
Contrary to Allen’s views, BlackRock CEO Larry Fink has expressed confidence that all stocks and bonds will eventually be tokenized on a blockchain. Notably, BlackRock recently tokenized its BlackRock USD Institutional Digital Liquidity Fund on Ethereum, accumulating significant assets in the process.
Despite challenges in building the necessary infrastructure and establishing interoperability standards, the tokenization of real-world assets on blockchains is expected to reach trillions of dollars by 2030. Investment bank Citi estimated this figure in 2023, while highlighting the ongoing obstacles in achieving widespread adoption of tokenization.
In the face of such developments, the Securities and Exchange Commission (SEC) is gearing up for a legal battle against the increasing influence of cryptocurrencies in the financial sector.