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TOKENFUTURE Preview: Thomas Cowan on the State of Tokenization

Updated: Jun 11

"In the long term, I view most financial assets as being tokenized. The question is when."

Galaxy is a digital asset and blockchain leader providing access to the growing digital economy.

Founded by legendary investor Mike Novogratz in 2018, the NYC-based company operates across three major business lines:

  1. Digital Infrastructure: Galaxy owns one of the largest bitcoin mining facilities in Texas and develops a full suite of blockchain infrastructure services, including a fast growing staking business and their self-custody technology solutions through GK8.

  2. Global Markets: Galaxy offers institutional-grade access to a broad range of digital assets products, including trading, derivatives, financing, capital markets and M&A advisory services.

  3. Asset Management: Galaxy’s asset management arm is a global asset management platform providing investors access to the digital asset ecosystem via a diverse suite of institutional-grade investment vehicles that span passive, active and venture strategies. In February, Galaxy announced that its asset management arm surpassed $10 billion in AUM.

As a company that describes itself as having the bones of TradFi and a deep understanding of crypto, Galaxy is well-positioned to be one of the major driving forces of tokenization.

Thomas Cowan leads Galaxy's tokenization efforts. Prior to joining the firm, Thomas worked on the PayPal stablecoin on Paxos’s stablecoin strategy team, at Ripple, and on the Fed’s CBDC team as well. He joined Galaxy in August 2023 and holds an MBA and MPP from Harvard and a mechanical engineering degree from MIT.

On June 18, he'll be giving a keynote on the macro case for tokenization at TOKENFUTURE. Recently, we convened to review the current landscape of tokenization, explore the competition for the dominant form of digital money, and discuss AllUnity, Galaxy's Euro-stablecoin venture in collaboration with DWS and Flow Traders.

Note: Our interview with Thomas marks the second episode of a series of conversations with the foremost leaders in tokenization. To stay in the know, follow us on LinkedIn.

So without further ado, please enjoy my interview with Thomas.

The State of Tokenization

Tokenization has been a topic of discussion for many years, yet it was only in the past year that we saw a significant surge in its adoption. What changed?

You're right. We've talked about tokenization for quite a long time now. However, last year, various key factors converged, generating strong momentum for the industry..

First, we’ve begun to see regulatory clarity emerge. Over the course of the last 12 months, many regulators have started to really dig into regulating the crypto space, thereby providing guardrails for us to innovate within.

This is key, because once potential founders and companies know the exact rules of the road, they can start building products without worrying too much about unexpected regulatory challenges. Before that, companies understandably have been hesitant to jump into the space.

Second, the overall user experience in crypto has become a lot better from last cycle - although we still have a long way to go before the tech feels as easy as a normal app on your smartphone, for instance. UX is important because it fosters the understanding of the technology and products, which simplifies the onboarding of users and institutions alike.

The last, and probably most important factor, was the steep interest-rate increase we experienced since 2022. When rates are at 0%, having a settlement time of two or even three days - which is common in traditional finance - was not as expensive as today. But now, with the risk free rate at 5%, it is costly not being able to earn this rate during the days-long settlement process. The real time settlement that tokenization enables can solve for this.

Those are the key factors that pushed the recent adoption of tokenization forward. 

Growth of tokenized U.S. treasury notes

We’ve seen money being tokenized first, followed by treasury bonds and private credit. This sequence suggests a discernible order in which assets are tokenized. Can we identify specific factors that dictate this sequence?

Interesting question!

In the long term, I see most assets as eventually being onchain. To me, the question is how, when, and in what order. To achieve that goal, it makes sense to start with the cornerstone of any financial transaction: cash.

This explains why the US dollar, as the world's reserve currency, was one of the first assets to be tokenized and why stablecoins now hold the largest market capitalization among all RWAs. Stablecoins allow us to transact with tokenized assets in a digital-native way without the need to settle transactions via traditional payment rails.

Now, what assets will follow?

I expect the industry will shift its attention towards assets and processes plagued by the greatest inefficiencies and pain points, where there is a somewhat higher risk tolerance among the affected parties to set up new systems for solving these problems.

One such area could be debt issuance. This is because debt can be issued by comparatively smaller players, which oftentimes have a higher willingness to innovate, especially given the cost savings and efficiencies they can achieve by incorporating tokenization.

Tokenized equities, on the other hand, might have a comparatively longer adoption timeline - especially because their movement and settlement today is exceedingly complex because of regulations and the multiple intermediaries involved in their issuance and trading.

CBDC vs. Stablecoins vs. Tokenized Deposits

Diving further into the realm of digital money, we observe that stablecoins have thus far taken the lead as the preferred form of digital money on blockchain rails. However, deposit tokens and CBDC might also play a big role in the future. How do you see this market evolve over time?

When I think about the future of money and how we're going to move and store it, I envision multiple paths going forward.

Having been a part of the Federal Reserve's CBDC team in 2020 and 2021, particularly on Project Hamilton, I could go quite deep on this topic, but I'll keep this concise to maintain everyone's interest.

In short, I consider the introduction of a retail CBDC, at least in the US, as highly unlikely at this time. This is for three main reasons–it is unlikely to use blockchain (because the throughput required is easily more than 1+ million), it would probably be fully intermediated, and would require approval and funding from Congress. A wholesale CBDC has a comparatively higher chance of issuance to enable instant settlement between financial institutions in the US. However, should its introduction be decided upon, its implementation will require a considerable amount of time, and would need to demonstrate to policymakers and regulators that there is clear utility beyond today’s system. As a result, I don’t see a US CBDC emerging any time soon.

On a national level, real-time payment systems like Pix in Brazil, UPI in India, or FedNow in the US might continue to dominate the domestic transfer of money for the country's citizens. On a national level, real-time payment systems like Pix in Brazil, UPI in India, or FedNow in the US might continue to dominate the domestic transfer of money for the country's citizens.

This area might be dominated by stablecoins, which already found a strong Product-market fit there.

So are we moving towards stablecoin domination then?

Not necessarily. Although stablecoins are utilized by many people nowadays, I do not see them taking over the world and becoming the dominant means of payment. That's for a few reasons. First, the fact that stablecoins are primarily issued by non-banks makes traditional banks and the traditional financial system more hesitant to embrace them. Additionally, because regulated and trusted stablecoins are likely to be fully backed 1-to-1 by HQLAs (usually treasuries, repo, and cash), they could alter the role of credit and liquidity in the economy at scale because they don’t have fractional reserves like traditional banks do.

This is where tokenized bank deposits could emerge. Those combine the benefits of instant settlement, scalability, and programmability while being issued inside the regulatory stack that regulators can understand and are already familiar with - providing the best of both worlds.

So basically, I envision a future where all four "buckets of money" are going to coexist.That is, stablecoins, bank deposit tokens, CBDCs, and real time payments systems. It isn't much different from the status quo, where I also can choose between wire transfers, Swift, Visa, etc. to move my money around.

What are the biggest obstacles that hinder the tokenization of assets from gaining even more steam?

First, there is regulation. Even though we've made some progress on that front already, there's still not enough regulatory clarity on a lot of aspects of this industry - which leads to hesitation by players inside the financial markets. But I am certain that this hurdle will be overcome in the foreseeable future, especially because of the progress happening in different parts of the world, like Europe. The US remains farther behind, but is having regulatory discussions ongoing.

Second, there is a lack of liquidity on secondary markets. Institutions hesitate to issue new tokenized assets due to a lack of buyers, while buyers show little interest in entering the market because of the limited availability of tokenized assets. A classic chicken-egg problem.

However, as reputable names get into the space, interest and demand of tokenized assets should rise, ultimately leading to an increase on the supply side. To kickstart this flywheel and attract more participants into this market, big and trusted institutions or companies need to get into the space, thereby granting a clear 'go' signal to other players.

Galaxy's Tokenization Efforts

With Galaxy’s venture arm you’re also frequently investing into startups building in the real-world assets space. Which areas of innovation do you find most exciting?

Personally, I am very excited by the different companies focusing on tokenizing treasury bonds.This may sound boring at first, especially because there are a lot of companies doing exactly that. While some of these companies will succeed, many of those companies will fail, and will likely end up pivoting into other assets.

This is when things will get exciting because we'll see those companies gradually move down the risk curve from the safest to riskier types of assets - slowly but surely leading us into a fully tokenized world.

Let’s talk about the different tokenization initiatives you are driving internally at Galaxy. Please give us a brief overview.

As the tokenization team at Galaxy, we continually question how we can offer products and services that stand out from others in the space. Fortunately, we can leverage our brand and the connections we have in the space, which uniquely positions us to support and connect different clients across many parts of this industry.

As mentioned previously, we're focusing a lot of our resources on tokenized cash, because this is the ultimate unlock for the tokenization of all other assets that has the most product market fit. The biggest tokenization project we've been working on since I joined Galaxy has been AllUnity, a Frankfurt-based stablecoin startup, which is formed through a joint venture with DWS and Flow Traders. The idea behind the project is to issue a fully regulated euro stablecoin. Thanks to the European MiCAR regulation, an onchain euro can finally be treated the same as an offchain euro, which is wonderful.

Now, the stablecoin market is highly competitive, and as an issuer, you need some kind of moat and differentiator to ensure that you end up with a large enough market presence. In AllUnity’s case, that differentiator is the joint venture that allows us to build the network for the token quickly.

Given that the JV partners’ experiences and skills at AllUnity complement each other well, we aim to establish trust and support for our stablecoin right from the start. This ensures that when investors seek to move and store euros onchain, they will prefer AllUnity and respective products as their 'go-to'.

However, the launch is still some time away, and dependent on timelines to obtain required licenses and approvals.

One goal of our upcoming conference is to assist financial institutions intrigued by tokenization in launching their own initiatives. What advice would you offer them on initiating this journey?

Education is key.

So I think the number one recommendation I would have is just to learn as much as possible on this space, the underlying technology, the use cases of it and the benefits it can bring. Once you understand all of this, you will see that the transition - namely the tokenization of all the world's assets - is somewhat inevitable. This is when people begin to embrace it.

Today, people are understandably still hesitant, especially because crypto has a lot of challenges in terms of use cases and regulatory clarity.

That's why attending conferences and events like TOKENFUTURE, engaging with people, and positioning yourself to understand the huge opportunities of this transition is crucial—especially once all the roadblocks are fully removed.

It's going to be a long road, but it'll be a fun one for sure!

Last year, Galaxy announced their strategic plans to expand to Europe. What motivated this decision?

Crypto is inherently global, right? So, in order to be a leader in this space, you really need to have a global mindset. This means to be where the innovations occur, where the talent is, and where most of the action takes place - Europe is one such place.

Second, regulations are everything, especially for a large firm like Galaxy. This is why we want to operate in regions where regulatory clarity is given. While the US continues to debate and think through how to approach and regulate this space, other countries and regions overseas jumped ahead and made comparative progress - one of them being the EU with the MiCAR regulations.

I personally have spent a lot of time in Frankfurt and London, and I've been quite impressed by the amount of talent that is located in Europe. That's why we're so excited to be here.


Are you also exploring tokenization within your organization?

On June 18 we host an exclusive event around tokenization tailored towards institutional investors, capital allocators and banks in Frankfurt am Main.

Learn more on our website or feel free to reach out to


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