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For years, the default assumption in the Ethereum community has been that it will inevitably become the global settlement layer for finance.
It didn’t matter that retail was jumping ship for faster and cheaper chains like Solana and Aptos — TradFi would recognize that Ethereum is the most battle-tested, credibly neutral and decentralized network, making it the only viable option for what Boston Consulting Group predicts will be a $16.1-trillion market by 2030.
There are signs the prophecy is coming true. BlackRock, Fidelity, Wisdom Tree, Sony, Deutsche Bank, UBS and Coinbase are all making Ethereum the core of their onchain strategies. Last week, Ethereum-based platform Blocksquare announced a $1-billion deal with Vera Capital to tokenize US real estate, and Securitize and Ethena teamed up to launch the Converge L2 to tokenize billions more real-world assets (RWAs).
2025 is shaping up as the make-or-break year for Ethereum’s dominance of RWAs, with tokenized assets surging 57% to $21 billion since the US election set the stage for new crypto legislation that clarifies the rules.
But some warn that Ethereum might watch it all slip away if it doesn’t play its cards right.
Sam Kazemian, founder of stablecoin project Frax Finance, believes Ethereum really is the best place for institutions to issue RWAs — but that doesn’t mean it’s going to win.
“I think that the complacency of like, ‘It’s just gonna happen because Ethereum is so good,’ that’s not true,” he says, arguing that unless Ethereum maxis start positioning the blockchain as the only acceptable source of truth for tokenized assets, its advantages will slip away.
Kazemian says the fact that BlackRock’s BUIDL is available on seven different blockchains undermines Ethereum’s security advantages.
That’s because holders of the ETH version of an RWA token are exposed via the centralized issuer to the risks of the token on the other chains. As the issuer of Frax stablecoins (FrxUSD is actually backed by BUIDL), Kazemian knows Frax is liable for anything that happens to its coins on Binance Smart Chain, which could have flow-on effects for holders of the ETH version.
So if a tokenized RWA has a centralized issuer, does Ethereum’s exalted network security matter as much? After all there’s almost $70 billion of USDT on Tron, despite concerns over its decentralization.
As much as Kazemian dislikes Bitcoin maxis, he says they have been effective at zealously guarding Bitcoin’s status as the sole store of value in crypto by deriding everything else as a shitcoin. He says ETH maxis should do the same about RWAs issued on other chains.
So, do they need to start acting like assholes to win the TradFi tokenization race?
“Yeah… they’re too nice.” he says. “You have to clearly, socially, make the limits of tokenization that it HAS to be on Ethereum L1.”
“If we wanted to actually make Ethereum the ledger of truth, we would have to be a little bit abrasive and very annoying and unlikable in this area and force institutions to essentially put their money where their mouth is,” he says.
“If it’s on anything else, it’s bullshit.”
A post on April 14 by the Ethereum Foundation’s new co-director, Tomasz Stanczak, suggests the idea could gain traction. He wrote that a big priority for Ethereum will be to insist on the requirement to “always mint assets on the L1.”
Also read: Pectra hard fork explained — Will it get Ethereum back on track?
Ethereum is well ahead on every RWA metric
“Every stock, every bond, every fund — every asset — can be tokenized. If they are, it will revolutionize investing,” BlackRock chair Larry Fink.
To date, Ethereum has been the No. 1 choice for major financial institutions and their clients.
Even though BlackRock’s BUIDL is offered on Solana, Aptos and four other chains, 93% of its $2.4 billion in AUM is on Ethereum. Most of that flowed in during the past six weeks, even as bearishness about ETH sunk to new lows.
BUIDL requires a minimum investment of $5 million and investors don’t seem willing to risk that kind of capital on anything but Ethereum.
“There was no question that the blockchain we would start our tokenization on would be Ethereum and that’s not just a BlackRock thing. That’s the natural default answer,” BlackRock’s head of digital assets, Robbie Mitchnick, said in March.
“Clients have clearly made the choice that they really do value decentralization, credibility and security. And that is a great advantage that Ethereum continues to have.”
BlackRock’s Head of Digital Assets, Robbie Mitchnick ft. Joe…
cointelegraph.com