You may have heard of Tokenisation of Assets, but you may be wondering what it actually means and how it relates to modern methods of trading. Let’s take a look below to find out.
What is tokenisation of assets?
Tokenization of assets relates to a digital representation of a real time tradable asset in the form of a blockchain or security token. This is a more modern take on one of the more traditional processes, commonly referred to as ‘securitization’.
Once you have one of these security tokens, you are then able to trade on secondary markets.
The idea behind asset tokenization is relatively simple as it allows customers the right to convert assets that have a perceived economic value, into a physical, digital, tradable token.
These tokens are managed and stored on a blockchain network.
‘Tokenization of assets relates to a digital representation of a real-time tradable asset in the form of a blockchain or security token.’
Now we understand what it means to tokenize assets, let’s take a deeper look as to why we tokenize assets, below.
Why do we tokenize assets?
There are many good reasons to trade using tokens. This kind of trading has a huge effect on investment and other trading and at its most important, it promises much better exchange potential, robust data integrity, more fluidity and possibly the most significant benefit, is the greater transparency.
Once you begin the process of tokenizing assets, they can be traded with in the same way as other crypto currencies.
The value exchange of your tokens can also be deployed under contract on blockchain, with all the extra benefits of blockchain transactions.
Why is tokenization disrupting the financial industry?
According to research by Deloitte, tokenization of assets is set to utterly disrupt the financial industry.
It is also predicted by Deloitte, that tokenization is set to make some huge leaps in terms of benefits for customers and entrepreneurs alike.
Tokenization of assets in the financial sector including banking is forecasted to not only make the financial industry faster, but also more accessible, cheaper and easier.
This will have an ongoing benefit of unlocking trillions of Dollars which are currently sitting as illiquid assets and potentially, Tokenization may substantially increase the number of trades.
Our purchasing power using this cutting edge trading tool is not simply constrained to buildings and the property industry, but other items of real value and investment, such as art.
The way we trade globally will soon be transitioning and going through a period of important and crucial change, with the arrival of tokenization. Deloitte reports that this new form of trading, has the potential to threaten and disrupt many industries who are not game ready, most significantly, the financial industry.
Let’s finish by an important thought regarding tokenization of Assets from Nils Veenstra, Director at BECON, a blockchain-focused event and research organization and as quoted in Forbes.
‘However, the fact that we can now take existing assets and tokenize them, that is exciting.’
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.
About Deltec Bank
Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.