Researchers at the Federal Reserve have delved into the world of tokenizing real-world assets (RWAs) on blockchain technology. This exploration sheds light on the transformative power of tokenization, emphasizing its potential benefits and financial stability implications.

Tokenization, as elucidated in the paper, is the process of creating digital avatars, known as crypto tokens, for non-crypto assets, often referred to as reference assets. This innovative approach intertwines the digital asset ecosystem with the traditional financial system, creating a complex web of connections. 

As RWAs, including stocks, bonds, real estate, and commodities, undergo tokenization, they gain the ability to harness blockchain’s advantages.

Tokenization: Bridging The Gap Between Digital And …