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

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The tokenization of real-world assets (RWA) is progressing rapidly, with RWA-related tokens increasing by an average of 286% in Q1, report As CoinGecko shows, the market capitalization of tokenized U.S. Treasury bonds recently hit an all-time high of $1.72 billion. according to To data aggregators RWA.xyzBut Polygon Labs’ global head of institutional investing believes the market will grow 50-100 times and traditional players will start to take an interest.

“$1.7 billion doesn’t really matter to me, even if it’s 50x growth from last year. For this to be meaningful, for me to care about this market, for me to actually care about this and spend time trying to enable and generate and create, I need 50x to 100x what it is today,” said Colin Butler at Crypto Briefing.

Butler emphasizes that $1 billion is “not a huge amount of money” for a firm like BlackRock. Still, he sees the RWA market reaching that level soon, though he’s not sure what “soon” means in terms of timeframe. “Do I mean 12 months from now? I don’t know. Do I mean 24 months from now? I don’t know. But I think we’ll see significant progress within the next three months.”

The Polygon Labs executive’s optimism has to do with mainstream players working on “creative ways” that will become apparent over the next few months: “I think this paints a clearer vision of the next steps for this business as to where it can become really big.”

Interoperability and Privacy

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Polygon technology is currently being used by some of the companies tokenizing U.S. Treasury bonds, including Franklin Templeton, Ondo and Swarm. Roger Bayston, head of digital assets at Franklin Templeton, said: Said Polygon will act as a gateway, enabling tokenized funds to be compatible with Ethereum-based blockchains.

Butler highlighted this role for Polygon tech, adding that AggLayer will play a key role in consolidating the liquidity of various traditional financial institutions entering the blockchain industry.

“By linking liquidity on multiple chains through an aggregation layer using zero-knowledge technology, we can create unified liquidity across the blockchain space and anchor it on Ethereum, and I think that will become the underlying infrastructure for much of global finance in the future,” Butler explained.

AggLayer stands for Aggregation Layer and is a phase in Polygon’s roadmap where different Layer 1 blockchains will tap into the same layer to connect, allowing different networks to seamlessly communicate, which is what most institutions looking to get into the blockchain industry are looking for.

“I think this is at the heart of all the discussions right now. This is what I see as the standard for connectivity right now for traditional finance and financial trading,” he added. This is also one of the biggest challenges for Polygon right now, as they need to avoid liquidity being trapped in different silos with no connectivity.

Notably, the use of zero-knowledge technology is also important for financial institutions adopting blockchain because it allows for privacy of transactions, which is what financial institutions are also striving for. “Generally speaking, it’s something that’s being worked on behind the scenes at the world’s largest global financial institutions.”

That’s why Polygon and other Web3 players are trying to convince traditional institutions that the blockchain industry now offers interoperability, privacy, and scalability.

“What’s been published so far is maybe 1% of what’s going to happen over the next 12 months in terms of the impact on global finance. I would argue that we’re going to see a huge wave of institutional capital flow into this space, based on the idea that everyone is going to move to this technology at some point,” Butler concludes.

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