Federal Reserve Board discussion on Tokenization of Real World Assets (RWAs)

In August 2023, the Federal Reserve Board members released a research paper that can be found below:

https://www.federalreserve.gov/econres/feds/files/2023060pap.pdf

TDLR: ... Currently the scale of tokenization is quite small, both when taken together or when measured relative to the market size of each token’s reference asset. However, many projects involving various categories of reference assets are in development, suggesting that tokenization may become a larger part of the digital asset ecosystem. Among the benefits of tokenization, lowering barriers to entry into otherwise inaccessible markets and improving the liquidity of such market are the most prominent.

The financial stability risks of tokenization mainly relate to the interconnections that tokenization creates between the digital asset ecosystem and the traditional financial system, possibly transmitting shocks or volatility from one to the other or possibly raising incentives to run on issuers failing to provide a transparent account of the mechanism linking the reference asset to its tokenized counterpart.