Leverage on Assets That Have No Price
Banks lend hundreds of billions against assets nobody can price. Tokenized assets inherited the problem without any of the machinery.
1. Transferability Was Never the Problem
The standard pitch for tokenized assets is that putting them on a blockchain makes them easier to transfer, and easier transfer means more liquidity. This is wrong.
Syndicated loans have standardized transfer documentation, free assignability, and a $800B to $1T annual secondary market. They still trade at discounts and take T+7 to settle. Transfer mechanics are not what makes something liquid. A private credit loan is illiquid because the documentation is bespoke, the buyer pool is five firms instead of five hundred, information about the borrower lives inside the lender's head, and there is no price discovery infrastructure. A token wrapper makes the ownership record move faster. It does not change any of those things.
A tokenized Level 3 asset, absent anything else, should have exactly the same liquidity as its off chain version. Probably worse. The buyer pool is smaller. The legal infrastructure is thinner. There are no dealer desks, no valuation agents, no ISDA framework.
If all a protocol does is solve for ownership, it has built a faster way to transfer something that nobody is buying. The question is whether the infrastructure the asset sits on can change the information environment enough to change the economics. That is what this paper is about.