Latent Capital Markets

Everyone’s talking about tokenization — Wall Street, crypto natives, even policymakers. The idea is simple: bring real-world assets on-chain to create products that are cheaper, faster, and more accessible.

But most conversations stop there. Tokenization isn’t some magic wand that fixes every capital market.

As a firm, we’ve had hundreds of conversations with financial institutions, capital market experts, and builders to answer the question: Which capital markets benefit the most from tokenization?

Our answer: latent capital markets.

Latent capital markets are markets that have existing unmet demand but have not been served by traditional market infrastructure. They’re markets hiding in plain sight: fragmented, inefficient, or inaccessible, yet full of willing participants who simply lack a way to transact.

Our first step in evaluating these markets is validating demand. Are there large OTC markets? If not, can we talk to institutions or consumers expressing clear unmet demand? Are there products market participants wish exist, but simply don’t?

Demand alone, however, is not enough. There must also be a reason that crypto is going to make this market work. Latent demand without an applicable insight is worthless.

We find that businesses focused on tokenization of latent capital markets are most successful if they are leveraging crypto for one or more of the below characteristics.

1. Crypto lowers the barriers to entry for new market launches.

Traditional financial markets do not offer products on a variety of assets because they are not prioritized, they are perceived as too risky, or there is no natural innovator.

This is a story that we’ve seen play out through our investment in Uranium Digital (UD). Despite the fact that uranium powers 10% of the world’s electricity and trades ~$10B in volume annually, there is no functioning spot market. The majority of trading volume happens OTC by licensed institutional traders. There are several ETFs offering exposure, but they are low liquidity tracking instruments that don’t allow for physical settlement.

The team at UD saw an opportunity to create a tokenized uranium asset with 1:1 backing and physical settlement. Prior to crypto, you’d likely have to innovate from within an existing financial institution to build a product like this. The institution would offer the liquidity, distribution, trust, licensing, reconciliation, settlement, etc. Blockchains can solve this now – they are open-source financial infrastructure.

Crypto is doing to finance what the app store did to software. Wall Street institutions no longer have a monopoly on financial product innovation. Nimble teams can identify market opportunities, and launch financial products for latent capital markets.

2. Crypto extends accessibility to the product.

Many financial products are available to institutional traders but not retail investors. Or maybe the products can be purchased in the US but not abroad.

Institutional investors have near-unlimited access to financial products – from equities and credit to real estate and commodities. Retail investors and international participants, however, face narrow opportunity sets and geographic barriers.

Plume is changing that. They’ve built a blockchain with built-in compliance and a native asset issuance platform called Nest. They recently received SEC approval for a transfer license, enabling compliant security transfers.

For institutions, assets brought onto the Plume platform gain instant, on-chain distribution to the largest RWA global investor base (200K+ RWA holders). Issuers can access new liquidity channels, launch compliant vaults, and expand investor reach across borders.

For retail investors, this same infrastructure unlocks direct access to institutional-grade RWA products. Maybe you live in Asia and want the predictable USD yield of an American solar farm, or you live in America and want exposure to emerging markets metals and mining infrastructure.

Plume’s approach reframes tokenization as distribution infrastructure, not just digitization.

3. Crypto aggregates supply and demand in a more efficient manner.

For many markets, the cost of aggregating liquidity is too high because of trust / legal challenges and limited automation.

Air rights are a clear latent market – proven demand, yet inaccessible to most. There is a history of large OTC transactions, such as Ken Griffin’s $100M+ purchase from St. Patrick’s Cathedral and Donald Trump’s $5M purchase from Tiffany & Co. Air rights transfers in NYC are up 39% YoY. The UK sees £2.5B of air rights transfers a year. The asset will become even more in demand as technologies like drone delivery take off, requiring access to private airspace.

Despite the market size and demand, small transactions are limited due to fragmented supply and high transaction costs. This is a market that has never had the liquidity necessary to function. SkyTrade is using blockchains to streamline supply aggregation. With a few clicks, homeowners can verify and list their air rights on the SkyTrade marketplace with functionality to trade and rent.

4. Crypto enables new programmable products on top of existing assets.

Traditional financial rails are rigid and outdated, limiting innovation in product creation and structuring. Crypto’s programmability doesn’t just create products for new assets, it also enables innovation on existing ones.

Horizon is reimagining home equity, one of the world’s largest but least flexible asset classes. Today, homeowners can’t easily use equity to build exposure to other assets.

Horizon introduces programmable, dual-collateral contracts that pair real estate with digital assets, starting with Bitcoin. Homeowners can allocate a slice of future home value into other assets and reallocate programmatically – without taking on additional monthly payments. Lenders, in turn, can better enforce collateral rules and offer more favorable terms.

Each contract is tokenized, creating transferable economic rights and real secondary liquidity. In effect, home equity becomes a dynamic financial instrument rather than a static store of value.

We’re actively investing in teams building products to serve latent capital markets. These are businesses where crypto is not the main story, but the unlock to demand. If you’re building on these principles, reach out at hello@portal.vc.