Introduction
In a September 8, 2021, World Economic Forum article, the “6 issues that will define the future of capital markets,” the forum states the first issue as “Democratization of Public Markets.” They draw on the WallStreetBets example to show how retail investors are moving more capital and having more influence on markets than ever before. They point out that retail investors traded 23% of U.S. equities at the time, up from 10% in 2010. The Forum follows the #1 issue with “2. Greater access to wealth creation opportunities” and “3. blurring of public and private markets.” Four years later, it seems these predictions are becoming more true than ever. New technology, especially cryptocurrencies and blockchain, and deals represent the transition of capital markets from inaccessible to widely distributed among a broader range of investors. This transition has had a catalyzing effect to create markets where they did not exist before as well. Examples of new markets include prediction markets, NFT markets, and staking markets. Other markets that have been democratized include currency exchanges, lending/borrowing markets, and private investments. This paper speaks to how tokenization is leading to the democratization of these markets by establishing first actual effectiveness and second proper adoption.
Tokenization
To begin, tokenization has been a hot topic throughout all media. The tokenization of assets has been a cornerstone of the crypto community since its inception. Going back, some might point to the stablecoin USDT issued by Tether in 2014 as one of the first applications of tokenization. Tether takes a real-world asset (RWA), the US dollar, and tokenizes it into a 1:1-backed stable coin, earning money from yield on treasuries that they buy with their massive pool of cash. Moving forward, around the time of the NFT craze in 2017, people looked to solve the common question of NFTs: “But can’t you just screenshot the same picture?” The solution was tokenizing RWAs. To put it simply, companies take real assets they own and wrap them up, usually into a special purpose vehicle. Then, smart contracts are deployed onto the blockchain to distribute ownership of the underlying assets through tokenization. The original steward of the assets continues to be a steward of them, and the newly minted tokens are openly traded on a blockchain. By assigning an underlying asset, people were able to see real value in how blockchain can level up existing assets and technology. A history of tokenization would be great, but it is a long history with innovation after innovation, so the present is much more applicable. Now, hundreds of assets are being tokenized: gold, dollars, private companies, corporate credit, mortgages, and much more.
A leading example of this trend is Figure, which went public on September 11, 2025. Figure’s core business is lending to homebuyers, usually in home equity lines of credit (HELOC). Quickly, HELOC loans are a second mortgage in the form of a revolver-style loan using one’s home as collateral. In the case of Figure, a borrower can apply and, according to Figure’s website, get approved in 5 minutes and funded in 5 days. The special part is what happens behind the scenes on a platform called Figure Markets. Figure’s market arm takes and tokenizes the HELOCs and other loans they distribute, and sells them on a market distributed on their provenance blockchain. This democratizes the opportunity for investors to earn the advertised 9% yields on those tokenized loans. These tokens can be compared to traditional mortgage-backed securities (MBS). According to an RBC wealth management report, a typical MBS has a minimum $1000 investment, 3 3-day transaction closing time, and is paid in a strict sequence. The Figure markets protocol has $155 million of total value locked (TVL: primary metric to measure the popularity and usage of DeFi protocols; it measures how much money is deployed into a protocol's smart contracts). Figure, however, is comparatively a small player. Decentralized Finance has $150 billion TVL, and stablecoins reach $303 billion.
A larger player is the Blockrock USD Institutional Digital Liquidity Fund (BUIDL). This fund distributes $1 stablecoins on the blockchain that investors can purchase. BlackRock then invests the cash in US treasuries and repurchase agreements. The yield earned is distributed through dividend payments of the same BUIDL coin, earning around 4.25%. The adoption of tokenization for large asset managers is a large part of the capital market’s development. The difference between securitization and tokenization is clear in that tokens exist on the blockchain, whereas traditional securities exist on a centralized market like the NYSE. The blockchain has a few democratizing features. First, Accessibility, tokens can be traded 24/7/365 in a common, international market with no investor restrictions or requirements. Second, transaction ease, there are no brokers or intermediaries, making transactions instant and cheap. This is not an anomaly; “Goldman Sachs and BNY have joined hands to launch digital tokens that mirror shares of money market funds, deepening Wall Street's push to bring blockchain technology into traditional finance,” (Reuters). JP Morgan owns a private blockchain Kinexys, which posted a report highlighting some key dates for adoption of blockchain and tokenization. Some key events:
2019: “Societe Generale issued $100 million of covered bonds on Ethereum.”
2020: “Jefferies, Nomura, Tilden Park Capital, DoubleLine Issued asset-backed security based on $159mm loans originated on Provenance Blockchain”
2022: “KKR Enabled access to private equity fund on Avalanche
Apollo Enabled access to private fund on Provenance Blockchain
Hamilton Lane Enabled access to private equity and private credit funds on Polygon.”
2023: “J.P. Morgan, Apollo, WisdomTree tested automated discretionary portfolio construction and rebalancing across multiple asset types (USD, private funds, mutual funds) on permissioned Ethereum (Kinexys Digital Assets), Provenance Blockchain, and Avalanche, as part of MAS' Project Guardia”
Progression and adoption by big banks have been clear and chronological. Consistent progression and investment are evidence that tokenization is not a trend or bubble, but instead a clear sector of value to banks. Talking about big banks and asset managers might not seem in the spirit of blockchain or democratization. However, when it comes to tokenization, a fact stands that an entity has to own the underlying asset, and large financial institutions are best positioned to assume that role.
The previous two paragraphs established two critical points. One, tokenization gives retail investors an unprecedented amount of access to traditional securities and private investment opportunities they previously never had access to. Two, financial institutions that are truly the moon to financial tides are willing to enable the transition into tokenized assets. Looking to the edge, a future of tokenization will entail private equity, credit, and real estate funds on the blockchain, along with the tokenization of any traditional security to move off of a restricted centralized platform and into the palms of retail investors. Today’s part of the story is well told through Robinhood. Robinhood now offers stock tokens, tokenized versions of common stock that allow investors to trade 24/5. They also offer tokenized versions of private companies like OpenAI and SpaceX to EU residents. Furthermore, their recent acquisition of Wonderfi points towards a future of tokenization because of Wonderfi’s L2 chain and on-chain wallet. These on-chain capabilities will be realized with their creation of their own Robinhood Chain, an L2 on top of Ethereum, that will be purpose-built for tokenized assets and financial transactions. In summary, Robinhood is trying to capture the convergence of all markets onto its platform, and is representative of the democratizing effect blockchain can have for retail investors. With this will come many risks as retail investors are put through a trial by fire. Problems in transparency, liquidity, and leverage are first in mind and might prove deadly to some ecosystems and tokens at first. However, as a rolling acceptance of these tokens happens, an amalgamation of markets onto the blockchain is very possible, and if finished, would greatly democratize investment and money allocation opportunities for retail investors.
Bibliograhy
Blake, Matthew, and Akash Shah. "6 Issues That Will Define the Future of Capital Markets." World Economic Forum, 8 Sept. 2021, www.weforum.org/stories/2021/09/six-issues-to-define-the-future-of-capital-markets/.
J.P. Morgan, and Apollo. The Future of Wealth Management: Ultra-efficient Portfolios of Traditional and Alternative Investments Powered by Tokenization. J.P. Morgan, 2023, www.jpmorgan.com/kinexys/documents/portfolio-management-powered-by-tokenization.pdf
Nishant, Niket. "Goldman, BNY Team Up to Launch Tokens Tied to Money Market Funds." Reuters, 23 July 2025, www.reuters.com/markets/wealth/goldman-bny-team-up-launch-tokens-tied-money-market-funds-2025-07-23/
Robinhood. "The Robinhood Chain | Built for Real-World Assets." Robinhood, 2025, https://robinhood.com/us/en/blockchain/
Securities Industry and Financial Markets Association. Investor's Guide to Residential Mortgage-backed Securities & Collateralized Mortgage Obligations. RBC Wealth Management, 2023, www.rbcwealthmanagement.com/assets/wp-content/uploads/documents/legal/mortgage-backed-securities-mbs-and-collateralized-mortgage-obligations-cmos.pdf