Tokenizing illiquidity: a qualitative approach within the European regulatory context

Details

Supervisors

Kolp, Manuel

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

enEmerging alongside blockchain technology and decentralized finance (DeFi), the tokenization of real-world assets promises to revolutionize the way we own, trade and manage assets. Yet its real impact on liquidity, particularly of traditionally illiquid assets, remains both overstated in industry narratives and undertested in practice, while the regulatory implications of the newest Markets in Crypto-Assets Regulation (MiCAR) remain uncertain. This thesis qualitatively examines whether tokenization truly enhances liquidity or merely reshapes it, while critically assessing the influence of MiCAR on these developments. Findings argue that tokenization does not “unlock” liquidity in illiquid assets directly, but rather creates new financial instruments with their own liquidity dynamics, a distinction often overlooked in industry discourses. Interviews with six key stakeholders highlight fractionalization as the most transformative aspect for liquidity brought by tokenization, though all insist that this liquidity remains contingent on mass adoption, robust secondary market development, and a coherent value proposition. The impact of MiCA is nuanced; while it provides essential legal clarity for asset tokenization, finally offering market participants a defined regulatory framework, its complexity risks creating unintended barriers. Institutional players welcome the certainty, but smaller firms face burdensome licensing requirements and compliance costs. Additionally, interviewee point out the outdated aspect of some regulations, and the critical need for a new mindset adapted to the new vision offered by tokenization and Distributed Ledger Technology more broadly. This thesis contributes to the ongoing research momentum around tokenization, by clarifying its practical effects on asset liquidity, and revealing the dual-edged nature of MiCAR. This, by adopting a qualitative, stakeholder-driven methodology, absent in most prior research, providing grounded insights rather than purely theoretical projections.