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The rise of Tokenized assets – the bridge between the old and the new capital markets


by Arunkumar Krishnakumar.



Arunkumar Krishnakumar
Arunkumar Krishnakumar
Most people in Blockchain whom I talk to, feel tokenizing real world assets is an amazing concept with huge potential. I have often thought that the real difference that tokenizing offered, as an economic model, is the ability to tag a number value to something abstract. Like attention, brand value, popularity, karma etc.,

There have been no lack of attempts to tokenize platforms that act as market places for creating abstract value. In the last year or so, I have come across several firms that act as market places for people to help each other, give and receive points and eventually turn them to tokens.

However, as we create this new value system using Blockchain, it has to be through a logical roadmap. One has to walk before running. And, cryptos have struggled to answer the question "Whats your intrinsic value?" - there are several consensus based answers, but the traditional world typically don't recognize that. And when the market collapses, the talk about creation of value digitally, often times look baseless.
However, as the Blockchain era turns a new page, we will need security tokens to act as the bridge between the old and the new capital markets.

I still believe value can be created digitally, and there is a market for that. We are at a point, where most of the world agree that Blockchain as a new economic paradigm is here to stay. As institutions plan their entry into this space, the economic model should stand its ground even in a quasi-traditional sense. Security tokens are exactly enabling that. They are beneficial across several dimensions, and some of them are:
• Inclusion: Tokenizing a fund focused on Manhattan properties could allow people across the world take part in a vehicle, which would have in the past been accessible only to the ultra rich.
• Liquidity: I can buy and flip a property wholly or partially if it is tokenized. Liquidity has always been a major concern with real estate, venture capital and private equity investments, and tokenizing would change the risk profile of these asset classes
• Efficiency: Just the speed of execution and settlement that smart contracts offer makes it a very efficient system.

We have had several headlines over the last few months on real world assets backed tokens. Especially from emerging market countries and their central banks. I am closely following India especially. But, Singapore is perhaps the world leader when it comes to their position on tokenized assets.

Earlier this week, the Monetary Authority of Singapore (MAS) and Singapore Exchange (SGX) announced that the Delivery vs Payments (DvP) app they were prototyping was working successfully. I had written about it earlier on Daily Fintech too, and was looking forward to this announcement.

“Based on the unique methodology that SGX developed to enable real-world interoperability of platforms, as well as the simultaneous exchange of digital tokens and securities, we have applied for our first-ever technology patent,”
- Tinku Gupta, Head of Technology, SGX
Through this prototype, the consortium of MAS, SGX, Deloitte and Nasdaq have tested the functionality where financial institutions can exchange and settle tokenized assets across different Blockchain platforms.

Most of these prototypes are conducted in a controlled environment with minimal risk. Thats because the technology and its viability in a global enterprise still needs to mature. But the concept of tokenising assets, and allowing access to a global consumer base would create new business models (and regulatory headaches).


Arunkumar Krishnakumar is a VC investor focusing on Inclusion, a writer and a podcast host.
Daily Fintech.
dailyfintech.com

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Mardi 20 Novembre 2018
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