Beyond The Stock Market: The Link Between Real World Assets And Foreign Direct Investment

The tokenization of tangible assets, otherwise known as real-world assets(RWA), is one of the most promising trends in blockchain technology. The key reason why it is so is that it has the potential to unlock the future of finance.

According to RWA.xyz, a popular analytics platform, the tokenized asset industry has reached a market capitalization of $700 million.

From the US tokenizing its short-term treasuries and bank deposits to Nigeria’s Solid Minerals Development Funds signing a partnership agreement with Agile Dynamics Tech, the vast potential of blockchain technology to redefine global investment opportunities is indubitably present. In this article, we explore how the tokenization of real-world assets can usher in foreign direct investment(FDI).

In the last two years, RWA has gone from a front-page newspaper story to a much bigger investment vehicle with RWA-focused companies like Stobox, Tokeny, Agile Dynamics Tech, etc, pushing its boundaries.  The growing popularity of RWA in the world of finance therefore underscores the importance of leveraging blockchain for economic growth.

RWA: A Game Changer

While some forward-looking nations are exploring the economic potential of the tokenization of real-world assets (RWA), others might just be sleeping on a viable opportunity to allure and expedite foreign investments. But as the competition for foreign capital increases, real-world tokenization is bound to open up access to foreign direct investments, thereby accelerating economic growth and creating job opportunities.

As it stands, not only is RWA tokenization attracting so much attention in the US Treasuries department, but it is also beginning to dominate the conversation in Africa’s largest economy, highlighting the growing importance of leveraging blockchain technology in the world.

With Nigeria, a country known for its abundant natural resources, signing a Letter of Intent(LOI)a partnership agreement with Agile Dynamics Tech, a Dubai-based Web3 consulting firm, it is evident that the West African country is bound and determined to make headway in attracting foreign capital through the tokenization of tangible assets.

This partnership agreement was signed at the Future Minerals Forum held in Riyadh, Saudi Arabia, where Nigeria was represented by the CEO of Solid Minerals Development Funds, Fatima Umaru Shinkafi.

Understanding The Importance of Real World Asset(RWA) Tokenization

At its core, real-world asset tokenization represents an investment vehicle backed by blockchain technology. It can be anything from real estate to gold deposits to tokenized bonds, and its fundamental criterion is that it must exist in physical form to be fractionalised, traded and stored on the blockchain.

The following are some of the benefits accruing from the tokenization of tangible assets that exist in the physical world:

Fractionalized Ownership

Tokenization makes tangible assets more accessible. Through this means, fractional ownership of tokenized assets has become an avenue for investors to invest in a spectrum of assets and different industries as well as countries.

Secure Ownership of Digital Assets

Blockchain is the underlying technology of digital assets offering transparency and security. This enables investors to rely on the protection that its immutable ledger guarantees.

Enhanced Liquidity

The availability of liquidity and the ease of converting tangible assets makes tokenization all the more attractive, as the mechanism for liquidating or swiftly exchanging them exists on the blockchain.

Cross-Border Accessibility

One of the advantages of RWA tokenization is that it transcends borders. This tears down barriers to investing in other countries and it facilitates foreign direct investment(FDI)with unhindered access to foreign capital across the world.

Regulation And Compliance

As investors are particular about the safety of their holdings, RWA tokenization is often carried out in a manner that is consistent with the laws and directives of local agencies. Across the world, a growing number of crypto regulatory agencies like the FCA(Financial Conduct Authority), SEC, etc are charged with the mandate to protect investors against financial irresponsibility and recklessness.

Foreign Market

The growing presence of RWA tokenization is enabling investors across the world to have access to untapped markets, or emerging markets if you like. There are boundless economic opportunities that this facilitates. An example could be a US citizen securing investment opportunities in Nigeria’s tin industry by buying tokenized fractions of its assets.

Lower Transaction Cost

Investing in tokenized assets usually attracts a small amount of transaction fee, otherwise known as a gas fee. This effective mechanism removes third-party tendencies and enables investors to save on such expenses.

Portfolio Diversification

With access to fractionalised assets, investors across the globe are offered a unique opportunity to diversify their holdings across a spectrum of assets and in different parts of the world.

Risk Management

When you combine blockchain technology as an immutable ledger and treasury management with regulation, you will have a perfect recipe for efficient risk management. Tokenisation of RWA therefore encourages a routine check on the financial standing of digital assets companies and their scrutiny by regulating authorities worldwide.

Conclusion

There has always been a bullish outlook on the tokenization of real world-assets(RWA) with many observers touting it to be the next big thing in the world of finance. After all, countries like the US and Nigeria are making a little headway in attracting foreign capital through this means.  RWA tokenization offers a lot of investment opportunities for investors across the globe, and it opens up access to foreign direct investment(FDI), which can propel economic growth.