Speaking at a session on Tuesday titled “From Token Assets to a Token Economy” at the annual World Economic Forum in Davos, Switzerland, blockchain industry leaders agree that the tokenization of real world assets could transform business models and entire industries.
By allowing people to hold a digital representation of a stock certificate, a property deed, a corporate security, gold, fine art or many other real-world assets, tokenization can power trading on secondary markets across the globe, despite the location of the physical asset or the holder of the token.
Says Neha Narula, director of the digital currency initiative at MIT,
“This is a little bit different than holding it through your bank or a trading firm like Etrade or Fidelity or Charles Schwab. It’s a digitized version of that asset, and as such it’s wrapped in this programmable layer, and we can build really interesting applications on top of that.”
Jeremy Allaire, chief executive officer of crypto fintech company Circle, explains how illiquid assets could attract investors from around the global through the issuance of tokens that are fully collateralized. Tokenization could bring an “unprecedented level of democracy,” opening up new streams of capital for global businesses and markets. He adds,
“You could argues that [capital markets] are very efficient. You have the New York Stock Exchange, Nasdaq. But who participates in those is really limited. It’s basically thousands of companies out of millions of companies. The ability to access capital as a start-up, small business, an entrepreneur, all the way as you grow, is limited…
So I think the promise of this is, can we actually create capital markets that are as open and global as what we have in e-commerce?”
Narula says digital assets can provide a much cheaper and faster way of “breaking down a Warhol painting into a million different tokens,” tokenizing the art world.
But that same ease of use could lead to abuse, sparking a surge in tokens that are not, in fact, tied to real-world property, as claimed. Says Narula,
“We want to have consumer protection. We want to have market integrity. People who are issuing assets should disclose information about what exactly those assets represent.”
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