Ben Strack

A deal by Securitize to tap into the registered investment adviser (RIA) community reflects a potential significant new step for tokenization market growth, industry watchers told Blockworks — a theme viewed as one of the crypto segment’s most promising developments.&nbsp;&nbsp;



Securitize revealed Thursday that it would buy Onramp Invest — a digital asset wealth platform working with US RIAs with combined assets under management of $40 billion.



The purchase allows the company to offer tokenized alternatives — like private equity, private credit and secondaries — through systems RIAs are accustomed to using for reporting to clients.



Tokenization is the process of digitizing real-world assets, such as equities or real estate, onto a blockchain — and backing those digitized versions by real-world assets. Settlement can be conducted in real time, and investors can see where their assets are stored on-chain.&nbsp;



Securitize President Jamie Finn said for the further adoption of tokenized alternatives, it was “crucial” to make them accessible to the RIA market — a community he said manages <a href="https://www.nrs-inc.com/resources/whitepapers/investment-adviser-industry-snapshot-2021-evolution-revolution-reimagined">$110 trillion</a> in assets in the US.&nbsp;



Read more: <a href="https://blockworks.co/news/eaglebrook-ceo-advisors-the-lowest-hanging-fruit-for-crypto-market">Eaglebrook CEO: Advisors the ‘Lowest-Hanging Fruit’ for Crypto Market</a>



“I think you will continue to see two things: first, expanded investor access to digitized financial products through expanded distribution — that is, meeting investors where they already are,” Finn told Blockworks. “And, second, continued digitization and improvement of other traditional asset classes.”



<h2 class="wp-block-heading">Tokenization takes another step</h2>



<a href="https://blockworks.co/tag/securitize">Securitize</a>’s acquisition is the latest signal that tokenization — an idea that has gained considerable steam over the past year or so — is not going away, industry watchers said. 



Ric Edelman, founder of Edelman Financial Engines and the Digital Assets Council of Financial Professionals, said there is no question tokenization is “the next big thing in crypto.”



“Some could argue that it will dominate the crypto world in the next decade,” he told Blockworks. “Getting advisers engaged is essential for the growth of the tokenization market.”



BlackRock CEO Larry Fink said in a March <a href="https://www.blackrock.com/corporate/investor-relations/larry-fink-annual-chairmans-letter">letter</a> to investors that <a href="https://blockworks.co/news/blackrock-ceo-us-lagging-innovation-tokenization">the tokenization of assets</a> could help in “driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors.”



Executives at WisdomTree, a fund group with $97 billion in assets under management, said last month the firm is looking to take advantage of its <a href="https://blockworks.co/news/wisdomtree-blockchain-native-app">“early mover status in tokenization”</a> after the launch of its blockchain-enabled consumer app.



More recently, Adapt3r Digital <a href="https://blockworks.co/news/on-chain-investors-us-treasury">launched a tokenized fund on decentralized marketplace Archblock</a> that allows access to short-term US Treasury yields.&nbsp;



Read more: <a href="https://blockworks.co/news/2023-year-of-asset-tokenization">Asset tokenization is shaping up to be crypto’s theme of the year</a>



<a href="https://blockworks.co/news/morgan-stanley-blockchain-capital-lead-48m-funding-for-securitize">Morgan Stanley-backed</a> Securitize, specifically, launched a fund tokenizing an interest in asset manager KKR’s Health Care Strategic Growth Fund II on the Avalanche blockchain in September 2022.&nbsp;



“When we announced our partnership with KKR, we were already having many, many conversations with other major institutions,” Finn told Blockworks. “KKR was just the first to move, and many conversations accelerated after they did.”



Private markets investment firm <a href="https://blockworks.co/news/private-markets-investment-firm-hamilton-lane-to-tokenize-3-funds">Hamilton Lane partnered with Securitize</a> that October to tokenize funds offering exposure to equities, private credit and secondary transactions.&nbsp;



“Over the coming months, you will continue to see big institutions announce the digitization of their products,” Finn said.



<h2 class="wp-block-heading">Significance of the deal?</h2>



Todd White, partner at crypto advisory firm Architect Partners, said that while various players in the tokenization sector have focused on different asset classes, they have struggled to connect with investor appetite.&nbsp;



“Matching Securitize&#8217;s recent headway tokenizing private funds with the distribution capability of OnRamp&#8217;s RIA network makes a lot of sense,” White said. “The deal structure is also sensible, with initial collaboration as predicate to full acquisition, and their collective success could bring validation and momentum to the tokenization space as a whole.”



Colin Butler, global head of institutional capital at Polygon Labs, noted that the Securitize deal gives “mass affluent” investors — those with a net worth of between $1 million and $3 million — the ability to invest in private equity and hedge fund instruments for which, prior to tokenization, they didn&#8217;t have access.



Declines of new issuances in public markets suggest that asset managers are running out of assets to distribute in the form of investment products, added Ralf Kubli, board member at the Casper Association.



“Accessing private markets for instruments offered to a broader public, will require more efficiency overall and higher transparency down to the individual asset level,” Kubli said. “It appears that a number of players are seriously looking at [distributed ledger technology]-based infrastructure, due to the unique capabilities of blockchains.”



Digital Asset Research CEO Doug Schwenk said that while the deal represents just one step in the evolving tokenization space, it opens up an important path for better distribution. Still, the RIA segment likely needs more education around such products, he added.



“Many RIAs have been slower to embrace the cryptocurrency investment narrative and thesis, while it&#8217;s much easier for them to bring forward traditional assets in a new mechanism or wrapper,” Schwenk said. “The RIA market is sizeable and could bring significant demand should the right tokenized products be on offer.”



Edelman argued that Onramp’s penetration into the RIA community has been limited.&nbsp;



“Still, the transaction demonstrates that Securitize recognizes the importance of connecting with the advisory community,” Edelman said. “And that puts them ahead of many others in the tokenization business.”



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Securitize deal to access RIA market latest step of tokenization growth journey

<div id="highlights-block_633dfc2f4943c" class="highlights">
 <ul>
 <li>Gemini acquired digital asset portfolio management platform BITRIA in January in effort to improve crypto access to asset managers</li>
 <li>Franklin Templeton, Ark Invest and Valkyrie Investments have targeted the advisor community with recent crypto SMA launches</li>
 </ul>
 
</div>



Gemini is joining the push to offer crypto to traditional finance (TradFi) advisors, with the Winklevoss-owned firm expanding its reach via a new partnership.



The exchange&#8217;s latest bid to integrate with one of the largest distribution platforms for financial pros mirrors others across both finance and crypto industries. Multiple companies, including Valkyrie and Ark Invest, are now seeking to bring exposure to the asset class to a broader range of investors.&nbsp;



By teaming up with Envestnet’s Tamarac platform, Gemini will effectively offer a direct custodial feed for crypto managed accounts to an enormous chunk of the TradFi sector, comprised of more than 3,000 registered investment advisors (RIAs) overseeing more than $1.3 trillion in assets.



“Tools delivering transparency into clients’ crypto holdings are essential for empowering advisors to provide advice that is truly holistic,” Dani Fava, Envestnet’s president of product innovation, said in a statement. “The integration between Gemini BITRIA and the Envestnet Tamarac platform provides a unified view of client portfolios across all asset classes.”



The move comes after <a href="https://cms.blockworks.co/gemini-now-a-one-stop-shop-for-advisors-after-bitria-buy/" target="_blank" rel="noreferrer noopener">Gemini acquired digital asset portfolio management platform BITRIA</a> in January to make available to wealth managers features such as SMA construction and portfolio rebalancing.&nbsp;



The company revealed <a href="https://cms.blockworks.co/gemini-acquires-crypto-trading-tech-platform-omniex/" target="_blank" rel="noreferrer noopener">the buy of trading technology platform Omniex</a> less than a week later in an effort to simplify the experience for institutional investors looking to go deeper into crypto.



More recently, <a href="https://cms.blockworks.co/gemini-to-expand-institutional-reach-via-partnership-with-betterment/" target="_blank" rel="noreferrer noopener">Gemini struck a deal with quantitative financial adviser Betterment</a> to offer crypto portfolios to its 730,000 customers.



Dan Eyre, head of Gemini BITRIA, told Blockworks that Tamarac is an ideal partner as Gemini looks to broaden the reach of its BITRIA offering.&nbsp;



“The millions of investors who prefer to work with an adviser when making investment decisions will now be able to engage with the Gemini ecosystem to gain access to crypto through these offerings,&#8221; Eyre said.



<h3 class="wp-block-heading">Gemini joins push to bring crypto to TradFi</h3>



Gemini’s integration with the Tamarac platform continues a trend of crypto firms making moves to target financial advisors in recent weeks.&nbsp;



<a href="https://cms.blockworks.co/franklin-templeton-preps-first-institutional-crypto-accounts/" target="_blank" rel="noreferrer noopener">Franklin Templeton revealed last month</a> that it was prepping its first crypto-focused separately managed accounts (SMAs), while <a href="https://cms.blockworks.co/ark-invest-jumps-into-crypto-sma-arena/" target="_blank" rel="noreferrer noopener">Ark Invest followed suit</a> to offer similar products earlier this week.&nbsp;



Both firms partnered with digital asset SMA platform Eaglebrook Advisors to bring the strategies to RIA clients.



Valkyrie Investments <a href="https://cms.blockworks.co/valkyrie-adds-crypto-smas-as-institutions-eye-digital-assets/" target="_blank" rel="noreferrer noopener">also unveiled crypto SMAs</a> this week. John Key, the firm’s head of distribution said he believes pensions, endowments and corporations are likely to pivot to these types of products once the markets stabilize.&nbsp;



SMAs differ from exchange-traded funds (ETFs) and other similar products in that they allow ownership of the underlying assets, unlike ETFs, which only offer shares in the fund itself.



Eaglebrook Advisors CEO Christopher King <a href="https://cms.blockworks.co/eaglebrook-ceo-advisors-the-lowest-hanging-fruit-for-crypto-market/" target="_blank" rel="noreferrer noopener">previously called</a> the US wealth management market the “lowest-hanging fruit” for the crypto industry.&nbsp;



Though only 14% of surveyed advisers were using or recommending cryptocurrencies, according to a March Cerulli Associates <a href="https://www.cerulli.com/press-releases/cryptocurrency-hits-advisors-radars" target="_blank" rel="noreferrer noopener">report</a>, 45% expect they will be using crypto in the future due to client requests.



“We see these developments as a natural progression as the crypto asset class matures,” Eyre said.&nbsp;



“The evolution to providing an all-in-one offering that fits the needs of institutions and advisers took time to develop…and we’re excited about our ability to offer a full suite of products that fit the needs of these audiences.”



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