RWA market needs to grow 100x for financial institutions to start caring: Polygon Labs exec

The tokenization of real-world assets (RWA) is growing rapidly, as RWA-related tokens rose 286% on average in Q1, a report by CoinGecko shows. Moreover, the total market cap of tokenized US Treasuries reached an all-time high of $1.72 billion recently, according to data aggregator RWA.xyz . However, the Global Head of Institutional Capital at Polygon Labs thinks this market should grow 50 to 100 times so traditional players start caring about it.

“Even if this is like a 50-fold growth from last year, $1.7 billion doesn’t matter at all to me. To make this relevant and for me to care about this market, it’s got to be like 50 to 100 times what it is now for me to actually want to devote my time to even trying to worry about this and trying to enable and engender and create something,” shared Colin Butler with Crypto Briefing.

Butler highlights that a billion dollars for companies such as BlackRock “is just nothing.” Nevertheless, he sees the RWA market getting there soon, although he doesn’t know what “soon” could mean as a time frame. “Does it mean twelve months? I don’t know. Does it mean 24 months? I don’t know. But I do see massive progress taking place, I think, in the next three months.”

The optimism manifested by Polygon Labs’ executive is related to mainstream players tackling “creative ways” that are going to be known in the next two to three months. “I think it paints a vision of clear next steps for how this thing could be really big.”

Interoperability and privacy

Polygon technology is currently being used by some of the players tokenizing US Treasuries, such as Franklin Templeton, Ondo, and Swarm. Roger Bayston, Head of Digital Assets at Franklin Templeton, said that Polygon enables their tokenized fund to be compatible with Ethereum-based blockchains, working as a gateway.

Butler underscored this role for Polygon tech while adding that AggLayer will play a significant part in unifying liquidity for different traditional financial institutions coming to the blockchain industry.

“We can connect liquidity on multiple chains through an aggregation layer using zero-knowledge technology, thereby creating unified liquidity across the entire blockchain space and settling to Ethereum. And I think that is the infrastructure that will underlie a significant majority of global finance in the future,” explained Butler. 

AggLayer, short for Aggregation Layer, is a phase in Polygon’s roadmap where different layer-1 blockchains will get connected by tapping the same layer. Consequently, various networks will be able to communicate seamlessly, which is something most of the institutions coming to the blockchain industry are looking for.

“That’s what I currently see being at the center of all these conversations. That’s what I currently see as the standard for traditional finance and connectivity for financial transactions,” he added. This is also one of the biggest challenges for Polygon currently, as they have to avoid the liquidity being trapped in different silos with no connectivity.

Notably, the usage of zero-knowledge technology is also important for financial institutions coming to blockchain, since it can give privacy to their transactions and this is something they are also aiming at. “It is, broadly speaking, in the works under the hood at the largest global financial institutions in the world. ”

Therefore, Polygon and other Web3 players are in the process of convincing traditional institutions that the blockchain industry currently offers interoperability, privacy, and scalability.

“What has been publicly announced is really like 1% of what’s happening in the next twelve months in terms of the impact of global finance. I would argue that there’s a tidal wave of institutional capital about to flow into the space based on the idea that they’re all looking to transition to this technology over time,” Butler concludes.