Digital Securities
Global Adoption of Tokenization Underway as Benefits Pique Interests
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One of the most bullish and referenced papers on the global potential of asset tokenization was released roughly 1 year ago. Titled “Relevance of on-chain asset tokenization in ‘crypto winter’“, it listed improved liquidity, accessibility, and the democratization of investing as being key benefits behind the practice that will see it grow into an expected $16 Trillion opportunity in the coming years. Fast forward to today, and this narrative has not only remained but strengthened in its likelihood, with the past year being filled with examples of global adoption.
Below, we take a look at what a group of panelists – speaking on Day 2 of the inaugural TokenizeThis Summit by STM – had to say on this very topic and where they see future trends surrounding tokenization.
What is Tokenization?
Before diving into who these panelists were and the insights they shared, it is important to have a rudimentary understanding of what it means when someone uses the phrase ‘tokenization’.
Tokenization in the context of blockchain refers to the conversion of rights to an asset into a digital token on a blockchain. Essentially, it involves issuing a blockchain token (secure digital representation) that digitally represents a real tradable asset. These tokens can represent any asset, such as real estate, stocks, or commodities, and enable fractional ownership, easy transfer, and the ability to transact on decentralized platforms, thus enhancing liquidity and facilitating access to investments.
Panelists
Kickstarting day 2 of the TokenizeThis Summit, the first panel shared insights into the global adoption of tokenization. Those participating included,
- Oi-Yee Choo, CEO at ADDX
- Jacobo Ochando Orti, Head of Tokenization at Deloitte
- Lorenzo Rigatti, CEO at BlockInvest
- Graham Rodford, CEO at Archax
The global nature of these participants only further highlights just how widespread adoption is becoming, with panelists hailing from Singapore to Italy, Spain, and the UK.
Key Themes and Commentary
Throughout this discussion, it was interesting to see varying perspectives formed by each panelist as they have learned to operate under different regulatory environments. When asked whether the future of tokenization will occur on a private or public blockchain, there was a clear consensus that regulators currently prefer private variants. However, both Choo and Rodford did elaborate, stating that much of the reasoning behind this preference is existing KYC and AML requirements. The entire panel seemed to agree, though, with the idea that we are building toward a future in which public blockchains become the norm among tokenization efforts.
“We support both, but I am very much in the camp of ‘public is really where this takes off in the future'” – Graham Rodford, CEO at Archax
Rigatti also pointed out that while this transition must eventually occur due to the lack of scalability and interoperability of private blockchains, their public variants must also be proven environmentally sound.
A few of the other key themes to come from this discussion include,
- Capital raises have shown promise, despite how tough success can be to find in the current macroeconomic environment
- Further research needs to be completed on which investor information should be kept on vs. off-chain
- Tokenization does not automatically make a product appealing. Efforts still must meet demand and the industry should only tokenize already strong assets
- A regulated Decentralized Autonomous Organization (DAO) is a long way off
Interestingly, the group as a whole appeared to agree that while the Real Estate Market is often viewed as the perfect environment for disruption through tokenization, early efforts should be focused on underlying assets that are less localized/niche. For BlockInvest, Rigatti indicates that this had led them to concentrate on corporate bonds fund shares, and similar products.
Final Thoughts on Tokenization
In light of recent advancements and adoption levels, tokenization stands poised to sculpt a future where assets are more easily accessible, trades are executed with increased efficiency, and investments are democratized. The leap in global adoption stands to herald a financial era where the merging of tangible assets with digital counterparts not only bridges traditional finance with decentralized finance but also opens new opportunities for investors and businesses alike.
As can be gleaned from commentary made on day 2 of the TokenizeThis Summit, for this potential to be realized, the market must first address a prevailing lack of interoperability and uniform regulations. Thankfully, it would appear as though these are issues already being considered, making that oft-referenced $16T potential not as far-fetched as it first may have seemed.
Overall, the integration of blockchain technology, demonstrated through thriving tokenization practices, subtly underpins a bright, inclusive, and innovative financial future for all.
