Characteristics of a tokenized asset
Last updated
Last updated
Tokenization of assets is the conversion of real assets into digital assets.
Tokenization does not change the original asset, but the way its ownership is managed.
Ownership is the key word here, as tokenization allows for both proof of ownership and fractional ownership.
Some examples of what can be tokenized: corporate debt and equity, loans, credit notes and invoices, judicial assets, precious metals, art (physical and digital), funds (providing liquidity and participation), collectibles (physical and digital), real estate (commercial, residential), intellectual property (patents, licenses), commodities and energy, and certificates.
Wider geographic reach: public blockchains are inherently global in that they present no external barrier to global investors. Today, it is very difficult for an investor from a developed country (around 4-5% interest rate) to invest in the high-yield capital market of Latin America (> 15% interest rate). Using tokenized assets, this process can be done with a few clicks.
Increased liquidity: capital market assets are a very illiquid type of asset, but tokenization fractionalizes them and unlocks liquidity potential by lowering the minimum investment amount, making the asset tradable in secondary markets, and allowing a broader base of investors to participate in the ecosystem.
Shorter settlement times: tokenization can shorten transaction times and it enables round-the-clock trading, as smart contracts triggered by predefined parameters can complete transactions instantly. On the AmFi platform, settling a lending pool can be 10 times faster and 70% cheaper than a similar mechanism used in today's standards.
Infrastructure upgrade: for many asset classes, fundraising and trading remain slow and difficult, requiring the exchange of paper documents. Digitizing these assets on a Distributed Ledger Technology (DLT) infrastructure can significantly improve the efficiency of these markets, with increased impact in areas where traditional infrastructure does not currently exist.
Improved asset-liability management: tokenization will improve the ability to manage asset liability risk through accelerated transactions and improved transparency.
Regulatory development: regulators are showing increasing signs of wanting to establish regulatory frameworks for the generation and exchange of digital asset tokens.
Learn more about the advantages of tokenized assets here.
