Tokenisation and Financial System Optimization

"Regarding the tokenisation of finance, our experiments demonstrate that wCBDC [wholesale central bank digital currency] can reduce trade-to-settlement delays by reducing reconciliation flows for transactions carried out on DLT platforms. DLT has also proved its ability to optimise post-trade functions.   The second main use case for DLT concerns cross-border payments. Interoperable wCBDCs have been identified as offering strong potential for facilitating cross-currency payments. MultiwCBDC arrangements could also facilitate cross-border transactions, including remittances, by optimising current correspondent banking models."   — From: Banque de France, Wholesale Central Bank Digital Currency Experiments with the Banque de France: New Insights and Key Takeaways, July 21, 2023 https://lnkd.in/ec2WCRuA

"𝐋𝐞𝐚𝐝𝐢𝐧𝐠 𝐭𝐡𝐞 𝐂𝐡𝐚𝐫𝐠𝐞 𝐢𝐧 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐈𝐧𝐧𝐨𝐯𝐚𝐭𝐢𝐨𝐧: 𝐀𝐬𝐬𝐞𝐭 𝐌𝐚𝐧𝐚𝐠𝐞𝐫 𝐀𝐛𝐫𝐝𝐧 𝐚𝐧𝐝 𝐂𝐫𝐲𝐩𝐭𝐨 𝐄𝐱𝐜𝐡𝐚𝐧𝐠𝐞 𝐀𝐫𝐜𝐡𝐚𝐱 𝐚𝐫𝐞 𝐚𝐭 𝐭𝐡𝐞 𝐅𝐨𝐫𝐞𝐟𝐫𝐨𝐧𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐄𝐱𝐜𝐢𝐭𝐢𝐧𝐠 𝐑𝐚𝐜𝐞 𝐭𝐨 𝐓𝐨𝐤𝐞𝐧𝐢𝐳𝐞 𝐓𝐫𝐚𝐝𝐢𝐭𝐢𝐨𝐧𝐚𝐥 𝐅𝐢𝐧𝐚𝐧𝐜𝐞!" 🌐 Archax, a #crypto firm regulated by the FCA, and abrdn, a major investment firm, have launched an institutional-grade money-market fund token, leveraging #blockchaintechnology for #asset representation, aiming to improve operational and cost efficiencies. 💼🔗 💰 The #tokenized money-market fund, using the Hedera Hashgraph system, is available for investments as low as $5,000, opening opportunities for a broader range of investors and attracting significant interest with a $400 million customer pipeline. 📈 🏦 The token acts like a yield-bearing stablecoin and can be used as collateral for trades, appealing to businesses and investors, especially in a higher interest-rate environment where there's a push to generate returns on assets. 💹 🔄 Archax plans to introduce trading pairs between the abrdn money-market fund #token and #bitcoin, allowing users to trade bitcoin against U.S. dollar-denominated money-market fund tokens, diversifying trading options beyond traditional fiat or #stablecoins. ₿💱 🚀 This innovation reflects a growing trend in the financial industry towards #tokenization of traditional assets and the exploration of new models in decentralized finance, particularly in response to changing economic conditions and the need for more flexible capital allocation. 🌟📊 For more information → https://lnkd.in/gY6AB9hF Gregory Stone, Ken Chapman, Breige Tinnelly, Simon Barnby, Nick Donovan, Rene Buehlmann, Bill Genovese, Simon Taylor, Vicky Brown, Ned Menton, David Wax, Harshal C., Penny M.

Another significant thought piece on tokenization. This is from late last year from Coinbase Institutional https://lnkd.in/gcD8g6Qs - These are some highlights and comments: 💡 Coinbase believes [tokenization] could be a vital use case for traditional financial players - the ability to run operations 24/7, automate intermediary functions and maintain transparent audit records can make simple onchain payments and settlements very powerful 💡 Most institutions rely on private blockchains, for example, due to their concerns around smart contract exploits, oracle manipulation and network outages 💡 Highlights the opportunity and appetite for tokenized US Treasuries in light of Fed rates - as opposed to old RWA use cases like real estate, commodities, art and other collectibles 💡 Many of the traditional market players involved in tokenization today have teams dedicated to both (1) understanding existing regulations and (2) developing the technology to the point where it can meet those regulations 💡 Projections on the size of the tokenization opportunity vary but estimates range from Citigroup’s $5T to Boston Consulting Group’s $16T by 2030. 💡 Stablecoins have yet to receive legal clarity in the US with regards to their status as bearer assets. But even outside the US, most tokenization efforts face large legal and regulatory hurdles 💭 I agree with much of this in terms of interest, adoption and the whys. 💭 I think everyone's eyes roll when you see trillion dollar TAMs thrown around - but Citi's TAM is just based on private assets, which is infinitely doable. BCG's TAM, includes listed equities from 2026 (albeit not a huge percentage of TAM) - long term I see the argument, but it is definitely further away and a much heavier lift. 💭 Where I do differ is that I don't personally see the regulatory concerns as a big issue. Ondo, Franklin Templeton and Blackrock/BUIDL all manage that with a variety of US approaches and flexibility depending on the path taken. 💭 Even if the topco is BVI doesn't mean you can't sell into US private markets with a public solicitation under 506(c). It would be nice to have specific legislation and a bit more flex around the Investment Companies Act but it is not a must have. If I had to point at a difficult must-have it would be #custody. In the meantime other jurisdictions such as Hong Kong are racing to offer a more competitive environment, and while I think that is hugely innovative and important, not likely to change US dominance in private markets. 💭 Finally a lot is made of interoperability and secondary markets. Again I think interoperability is useful and interesting, but secondary markets are not a reason alone to tokenize and have many issues. See Liquidity Wednesdays for more on this. #digitalassets #tokenization #rwa #capitalmarkets #financialservices #institutions

The technical challenges and opportunities in creating platforms for tokenized assets, based on Portal’s experience with decentralized finance solutions, are twofold. First off, according to Boston Consulting Group (BCG), the tokenization of financial assets on the blockchain will grow into a $16 trillion market by 2030 and will represent 10% of all financial assets. It’s a big opportunity. One main focus for tokenization companies is building a regulation-friendly platform that allows people from around the world to buy US securities easily. However, they acknowledge the challenges of regulatory uncertainty and user onboarding in the crypto market. There are two challenges that Portal addresses for them: Streamlined UX and DevX: With our solution, companies are able to abstract away all complexity from customers while customers maintain self-custody. The balance between operational efficiency, compliance, and a fantastic user experience is critical to driving utility.  Compliance/Security: Compliance + security are key parts of every tokenization platform, from issuing the token to custody and on-going utility and value. As a result, we’ve seen companies go to great lengths to have enterprise-grade infrastructure in order to build trust with institutions. Who are some tokenization platforms and industry players to keep an eye on? There are quite a few, with some being: - Superstate - Dinari - MetaWealth™ - Securitize - Parfin - Maple - Obligate - Centrifuge - Propy Title Agency - Steakhouse Financial - Mauve - And many more... Tokenization of financial assets, with the blend of a streamlined UX and robust security, presents a massive opportunity for enhancing liquidity while also democratizing investment and reducing barriers to entry.