Bank of England Warns of RWA Trend's Impact on Financial Stability

The rapid tokenization of real assets (RWA) is raising alarms at the Bank of England, as it could pose risks to the financial stability of the nation. This concern is primarily linked to the unpredictability of unsecured cryptocurrencies and stablecoins. According to experts, British banks are generally supportive of cryptographic technologies, such as programmable ledgers and smart contracts, which are employed in the tokenization of money and other real assets (RWA). According to asset management firm 21.co, digitization has become a rapidly growing part of the crypto ecosystem.

It is estimated that by 2030, this market will reach a capitalization of $10 trillion. Last month, representatives from one of the world's largest banks, HSBC, announced their plans to launch a digital asset custody service specializing in tokenized securities for institutional clients. France's Societe Generale recently sold "digitized green bonds on the Ethereum blockchain" worth €10 million.

The Bank of England representatives believe that the escalating scale of tokenization could create systemic risks for the global financial environment, both in the UK and worldwide. The excitement surrounding this technology has the potential to "increase the interconnectedness of cryptocurrency and traditional asset markets, as they are represented in a single ledger. This poses a direct threat to existing institutions," as stated in the report.

Experts acknowledge that "the risks are currently limited." However, the Bank of England believes that continued monitoring of this sector's development and trends is essential.

Experts are calling on fintech companies to engage in global cooperation with regulators. It is noted that regulatory authorities are actively trying to determine the best methods for overseeing and securing fund tokenization. "International coordination will help reduce the risks of cross-border side effects, regulatory arbitrage, and market fragmentation."