Paul Atkins, co-founder of ChainLink Labs, is now clear as chairman of the U.S. Securities and Exchange Commission, and “the path to tokenization of the financial system” has been revealed.
Speaking to Cointelegraph, Nazarov said it wasn’t easy as there are a number of individual challenges in terms of data, chain connectivity, compliance and many other areas. But if that happens, the outcome can be enormous.
Just consider that all cryptocurrencies in the world currently have a market capitalization of around $4 trillion. If traditional financial assets are tokenized and brought on-chain, it could increase market capitalization by more than 10 times, he said.
“That people aren’t totally grateful for Tradfi [traditional finance] Nazarov said.
Trump has shown changes in tokenization
The global asset management industry has surged to a record $128 trillion According to a recent report from the Boston Consulting Group, in 2024, managed assets (AUM) increased 12% from the previous year. The majority of these assets are managed by institutional investors, including insurance companies, pension funds, sovereign funds, donations, and family offices.
Next, look at the crypto sector. Nazarov’s $4 trillion market capitalization is driven primarily by retail investors. “How much retail demand is there? Maybe [we reach] It’s $8 trillion, perhaps $10 trillion, but not $50 trillion. You need cordfi to reach $50 trillion. ”
Before President Donald Trump took office in early 2025, US regulators warned institutional investors to avoid crypto. “Don’t touch anything like this. It’s illegal,” they said, Nazarov. “But now, regulators say, “That’s not the only thing.” do not have Illegal, we want you to do it. So, a significant amount of Tradfi assets seems inevitable – “unless the macroeconomics is a crater.”
“Craters” can be caused by an economy that moves from “risk-on” to “risk-off” investment environments. There doesn’t necessarily have to be a major perturbation (e.g., economic recession) to lean towards “risk-off.” A mild recession could make this happen.
“All these new tokenized assets require an active market where people want to try new things, trade capital and deploy it to new equipment,” Nazarov admitted.
Still, even with a recession, tokenization will ultimately happen – not too fast. “Now, the terms are positive. Interest rates are expected to be reduced, and the SEC chairman is giving a speech on how everything is tokenized. We can’t imagine a more positive scenario.”
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When Trump re-inaugurated office in 2024, he said he would become “crypto president.” So far, he has provided in Nazarov’s view.
“We were already meeting with the SEC early in the year,” he recalls. He met with SEC Commissioner Hester Perth, who was appointed in Trump’s first term, as well as his team. “I think she already had a green light to get things started early in the year,” even before the US Senate confirmed Atkins on April 9th.
“So a lot of work was already underway and then it was more public when it became clear who the Chairman was. At that point, the risks and doubts were removed from the equation.”
In May, Cointelegraph reported that tokenization had a breakout moment. Companies like BlackRock, Libre and Multibank have driven $1 billion tokenization “showing a transition from theory to implementation.”
The increasing complexity of the Oracle blockchain
Working in parallel and sometimes in conjunction with the tokenization process is an evolution of Blockchain Oracle, the main business of chain links.
Oracle is an entity that connects a blockchain to an external system. For example, “pull-based Oracle” retrieves data from the real world (i.e. off-chain) and distributes it to a blockchain network that can be used by smart contracts. This information is as simple as stock prices and cryptocurrency prices at a particular time.
Not very common and less complicated is “push-based oracle.” This allows smart contracts to deliver commands to off-chain systems that trigger them to perform certain actions. One example is an Oracle that “Ping” an Internet of Things system to “Ping” (i.e., the real world) to “Ping” (i.e., the real world) to unlock the car door after the rental payment is confirmed on the blockchain.
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Chainlink is the world’s largest Oracle provider. There is over 1,000 spread across approximately 15 broad categories, including Oracle for data, Cross-Chain Connections, Compliance, Identity and Risk Management. Currently, some projects include multiple oracles.
For example, one real use case (see chart below) uses three different oracles. One is to write valuation data into a contract, the other is to synchronize the contracts across different chains, using a third to synchronize the data into the institution’s accounting system.
The third Oracle in this example is Compliance Oracle. We provide automated ID services such as customer knowledge and money anti-laundering verification. This is important for institutional investors. Other oracles in this example were used to move data across the blockchain from private blockchains owned by Australia and New Zealand (ANZ) banking groups to private blockchains from Ethereum Sepolia chains. The transaction was between two Tradfi giants (ANZ and Fidelity International), with support from central bank Hong Kong’s monetary authorities.
Another example (see below) involved moving tokenized Hong Kong dollars from private chains to public chains and tokenized funds. In this case, Tradfi giant UBS was the asset manager and SBI Digital Markets was a fund distributor and custodian, moving from the Arbitrum blockchain to the Ethereum blockchain via ChainLink’s Oracle Network.
It’s not just Singapore, Hong Kong and Dubai anymore
Nazarov noted that the two use cases above involve Singapore’s Hong Kong monetary and financial authorities, respectively. Last year, these two jurisdictions, along with Dubai, were “the only place where such a thing could be done. Now we’re doing them in the US, where regulators are involved.”
Nazarov expects several large-scale US tokenization projects to be produced this year, but “next year you can see the race and by the next year there will be a meaningful volume.”
We should be seeing a new tokenized asset flow of at least $1 trillion in the next two or three years, adding “probably trillions” and Nazarov. “At that point, tokenization is a large part of the crypto industry and will redefine what the industry is.”
He praises Atkins and the current administration for his positive thinking of being procrypted and protokenized. “That’s important because crypto is what the industry is today, but tokenization is the next progress,” he told Cointelegraph.
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