It is the last day of the World Economic Forum (WEF), which will be held in Davos-Klosters from 14 to 19 January 2024, a global event that brings together the most influential players in politics and business to discuss the next trends in the business world .
It was only a matter of time before the topic of “tokenization” was addressed by the largest crypto players in the sector.
What is tokenization?
Unless you’ve been living under a rock, many will have heard that it’s the new buzzword going around Wall Street. Forget Initial Coin Offerings (ICOs), Security Token Offerings (STOs) and Initial Exchange Offerings (IEOs), Non-Fungible Tokens (NFTs), Decentralized Finance (DeFi), Central Bank Digital Currencies (CBDC) or the REAL use case of Blockchain technology. We have a new trend for 2024: tokenization, when assets are converted into digital tokens.
During the WEF, the panel consisted of Lieve Mostrey, CEO of Euroclear, Jeremy Allaire, CEO of Circle, Denelle Dixon is CEO and Executive Director of the Stellar Development Foundation, and Anthony Scaramucci, founder of SkyBridge Capital. The panel discussed tokenization and how it introduces a new dynamic of ownership hosted on a blockchain with the potential to impact multiple sectors of the economy.
Jeremy Allaire, CEO of Circle, the USDC stablecoin, said during the WEF roundtable that he believes tokenization should not be regulated by the US Securities and Exchange Commission (SEC). Allaire points out that tokenization is similar to data, and that tokens are used to demonstrate and represent things that have value.
Defining where tokenization fits into the financial sector remains ambiguous. One challenge, Allaire points out, is that the government says OK, this is a new new monetary instrument – it’s not an equity or financial instrument. In the USA it is argued that tokens must therefore be securities.
Watch the full WEF debate here.
Wall Street and tokenization
There has been a strong push among Wall Street firms to step up their efforts to tokenize assets on the blockchain, as I reported for Benzinga. Tokenization occurs when tangible and intangible assets are converted into digital tokens: everything from stocks and bonds to gold bullion, real estate, and digital and physical art.
In March 2023, BlackRock CEO Larry Fink also commented in his annual letter to shareholders that there is operational potential of some of the underlying technologies in the digital asset space that could have interesting applications.
Tokenization of asset classes “offers the prospect of driving efficiency in capital markets, shortening value chains and improving costs and access for investors,” he said.
Tokenized Funds Skyrocketed to $800 Million in Value in 2023
Tokenization of traditional assets has also attracted the attention of legacy financial institutions. According to a recent report from Moody’s, a leading investment risk rating firm, the value of tokenized funds has increased from $100 million in early 2023 to around $800 million today, driven by the increasing tokenization of securities US Treasury, reports Cryptonews contributor Ruholamin Haqshanas.
It will be interesting to see how the tokenization trend develops in 2024.