Standard Chartered nominates penomo for the Earthshot Prize 2025! Read more
Apr 23, 2025
3
min
Have you ever wondered why financing hard infrastructure such as renewable energy projects remains so complex and exclusive?
Traditional financing systems, while robust, often create unnecessary barriers that limit innovation and participation. Tokenization - representing real-world assets as digital tokens on blockchain networks promises to change this dynamic entirely.
Why Financing Needs an Overhaul
One of the most pressing reasons financing needs an overhaul is the substantial upfront costs associated with renewable energy projects. For instance:
High Initial Investment: Renewable energy projects like wind farms and solar installations typically incur 60%–90% of their lifetime costs upfront, making them capital-intensive.
Cost of Borrowing: In many emerging economies, borrowing costs are exceptionally high, often exceeding 15%, further increasing the financial burden on developers.
Risk Perception: Renewable projects are often perceived as riskier investments compared to traditional energy sources. This perception leads to higher interest rates and stricter collateral requirements, deterring investors and financial institutions from supporting these projects.
These inefficiencies are no longer just inconvenient - they’re deal breakers for the energy transition.
Enter tokenization.
Tokenization: A Game-Changer in Finance?
Tokenization is the process of converting real-world assets (RWAs) into digital tokens on a blockchain. These tokens represent ownership rights to the underlying asset (e.g. credit)
The Benefits of Tokenization
Fractional Ownership – Investors can buy small portions of high-value assets, increasing market access.
Speed & transparency - Instant Settlement, reduction of intermediaries and onchain records of asset’s lifecycle data
Composability & Programmability – Smart contracts automate financial agreements and action triggers, creating more efficient financial markets without human interference.
These benefits have already led to hundreds of millions of dollars in assets being tokenized, including trade finance, real estate loans, and structured credit products.
Tokenization in Action
Institutions and crypto-native firms are already leveraging tokenization for financing:
Standard Chartered tokenized $500 million worth of trade finance assets.
UBS issued $28 million in tokenized structured notes.
MakerDAO allocated over $3.3 billion to tokenized real-world assets.
Meanwhile, projects like Penomo are tokenizing renewable energy financing, bridging the gap between private capital and climate-focused investments.
The total Real-World Asset (RWA) value on-chain in March 2025 crossed $20B!
Challenges and the Road Ahead
Despite its potential, tokenization faces certain challenges like:
Regulatory Uncertainty: Lack of clear laws slows cross-border transactions and wider adoption
Model scalability: Seamless onramp/offramp of capital for TradFi funds is paramount for large scale adoption. The rising institutional adoption of digital assets currently gives a promising segue.
Interoperability: Concentration of liquidity on certain chains and limited compatibility between blockchain platforms restricts growth.
However, these challenges also present opportunities for innovation and growth. For instance, as more blockchain protocols become interoperable, tokenization can expand across different platforms, enhancing its reach and efficiency.
The Verdict: Is Tokenization the Best Bet?
While not a silver bullet, tokenization is undoubtedly one of the most promising innovations in finance. Its ability to enhance liquidity, efficiency, and transparency makes it a powerful tool for industries requiring large-scale financing, including private credit, equities and hard infrastructure debt.
As regulations standardize and institutional adoption continues at this rate, tokenized finance is poised to become the new normal.
About Penomo
Penomo is an end-to-end financing protocol bridging private capital markets with tokenized AI & renewable physical infrastructure to address the $4tn+ energy financing deficit by 2030. It transforms physical infrastructure into an institution-grade digital asset class, delivering a sourcing & allocation solution to sustainability-oriented institutions and asset managers globally. Backed by top institutions, nominated by Standard Chartered for the Earthshot Prize, and with a blended expertise from JPMorgan & Chase, Deutsche Bank, and BlackRock’s Recurrent Energy in institutional finance, digital assets and infrastructure, its mission is to sustainably power humanity on Earth and beyond.