A financial law professor told Congress in a speech Wednesday that public blockchains are too “fragile” to tokenize billions of dollars of real assets because they are largely inefficient and cannot handle large volumes of transactions.
“Cryptocurrencies run on permissionless public blockchains, and no tokens are needed,” Hilary Allen, a professor at American University Washington School of Law, said in a speech before the Financial Services Committee of the United States House of Representatives (HFSC) on June 5.
Allen was one of several industry leaders invited to speak about the impact tokenized RWAs could have on financial markets – where she said public blockchains are not a suitable enough infrastructure:
“Blockchain suffers from inevitable inefficiency and operational fragility that make it unsuitable as a real-world asset support infrastructure.”
Allen said she thought blockchain would be a “revolutionary” technology when it was discovered a decade ago before she began learning from independent technology experts about how “limited and problematic” the infrastructure was “.
“Public, permissionless blockchains are inappropriate for the vast majority of problems people have tried to solve,” said the self-described “financial pessimist.”
Allen claimed that public blockchains “cannot process large amounts of transactions.”
However, countless transfers worth over $1 billion have taken place on Bitcoin and Ethereum.
For example, a Bitcoin whale transferred $6 billion to a new address in a single transfer in March.
Allen claimed that ledgers and other databases might be better suited for coding, but he offered no rationale for any specific technology.
“We need to be very thoughtful about where we deploy the token,” Allen concluded.
about: Tokenized Asset Market Could Reach $16 Trillion on Public Blockchains – RippleX VP
Allen’s comments contradict those of BlackRock CEO Larry Fink, who believes that every stock and bond will eventually be converted into a token on the blockchain.
BlackRock notably tokenized its institutional digital liquidity fund in USD on Ethereum in March. According to analysts at 21Shares, the fund has already amassed $462 million in assets.
Today, more than $1.53 billion in U.S. Treasury securities are tokenized on the blockchain.
In March 2023, investment bank Citi estimated that between $4 trillion and $5 trillion worth of RWA would be tokenized on the blockchain by 2030.
However, Citi acknowledged that there are still challenges ahead in building the infrastructure and ensuring that a set of interoperability standards are widely followed.
review: Godzilla vs. Kong: SEC Faces Uphill Battle Over Legal Power of Cryptocurrencies
