Ripple Labs and Other Pioneers Taking Financial Blockchains Mainstream

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Financial innovation is well underway. So is the race among countries to attract the entrepreneurs and investment that will yield practical, timesaving, commercial applications of a diversity of blockchain technologies. Thanks to legislation signed into law a few months ago and a Securities and Exchange Commission (SEC) refreshingly committed to clarifying and optimizing the U.S. regulatory landscape, much of that innovation will take place in the United States.

Last month, the SEC introduced “Project Crypto,” an initiative aimed at modernizing securities rules to better accommodate on-chain markets and tokenized securities. Its goals include clarifying how securities laws apply to cryptocurrencies, creating space for trading tokenized securities, facilitating the development of custody and intermediation models for trading tokenized assets, and ensuring investor protections.

Right on cue, Ripple Labs (a blockchain platform with a digital currency called XRP), DBS (a digital exchange), and Franklin Templeton (an investment and wealth management company) revealed their joint project to provide tokenized trading and lending services for institutional investors. The collaboration will help investors better manage market volatility by providing a way to shift funds between stable coins and yield-generating assets.

The DBS Digital-Exchange (DDEx) will list sgBENJI (a tokenized version of Franklin Templeton’s U.S. Dollar Short-Term Money Market Fund) beside Ripple USD (RLUSD) so that clients can trade between RLUSD and sgBENJI at any time. That will help them to rebalance portfolios quickly and earn yields during periods of market uncertainty. In the next phase, DBS plans to permit clients to use sgBENJI as collateral to unlock credit, either through repurchase agreements with the bank or third-party lending platforms, with DBS acting as the collateral agent.

Ripple’s (and other providers’) stablecoins are increasingly being integrated as on-chain settlement and off-ramp liquidity for tokenized funds, making tokenized products practically usable. Tokenized instruments can enable near-instantaneous financial settlement relative to the long tie-ups associated with traditional settlement cycles of legacy methods. They also provide market participants with the opportunity to use tokens as on-chain collateral, freeing up resources. Moreover, tokenization makes it economically feasible to break assets into much smaller pieces, broadening investor access to securities and credit.

Ripple’s Nigel Khakoo called the effort a “game-changer,” noting that investors can move between a stablecoin and a tokenized fund within a “single, trusted ecosystem, unlocking real-world capital efficiency, utility and liquidity that institutions demand.”

Meanwhile, BlackRock is exploring how to bring exchange traded funds (ETFs) onto public blockchains. Tokenizing ETFs would signal a larger step into blockchain-based financial products and would increase the share of funds that could be issued and transacted more efficiently as tokens on chain.

BlackRock is still pending the green light on approval, but its exploration underscores a wider trend across the world of finance. There is a growing demand from institutions looking for regulated, on-chain products as tokenized assets are gaining ground in global capital markets. The growth in dollar-value of tokenized real-world assets, increasing institutional participation, regulatory movement, and development of infrastructure make this more than just a speculative trend. The evidence strongly indicates that tokenized assets are gaining broad, global acceptance and momentum.

With clear rules and concrete guardrails now in place, the manufactured uncertainty that had deterred investment in promising financial technologies and other block chain applications has been lessened considerably. That improves prospects for more efficient delivery of services, rapid settlement of financial transactions, freeing of unnecessarily tied-up capital, and the United States establishing a stronghold as the global hub of financial technologies and other block chain applications.

 

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