The rise of tokenisation can’t be ignored, but what is tokenisation? And what does it mean for innovation in financial services and access for end investors?
The rise of tokenisation can’t be ignored, but what is tokenisation? And what does it mean for innovation in financial services and access for end investors?
The CEO of Blackrock, Larry Fink, recently said that tokenisation will be "the next generation for markets.'' His speech went viral, amassing almost a quarter of a million views, reinforcing the astonishing appetite for tokenisation. Fink’s speech reinforced what the data already shows: A new era of future-facing, tech-enabled wealth accumulation is now well underway
It’s not just institutions talking about it. In November, the U.K. government’s Asset Management Task Force published a report detailing a "blueprint" for the implementation of tokenisation for FCA-authorized funds. The collaboration with the U.K. Treasury and the U.K.’s financial regulatory body, the FCA (Financial Conduct Authority) aims to improve efficiency, transparency and international competitiveness in the investment management sector. The move has been hailed as a "milestone in the implementation of tokenisation" by Michelle Scrimgeour, Chair of the Working Group and CEO at Legal & General Investment Management.
The conversation on the potential of tokenisation is moving fast. With Fink pointing toward the appetite and U.K. government engagement, it’s important to go back to basics on the ins and outs of tokenisation, especially in the context of why financial service providers need to take note.
So, what is tokenisation?
At its heart, tokenisation is the process of converting rights to an asset into a digital token on a blockchain. In simpler terms, it's about transforming real-world assets into digital representations that can be easily and securely traded, shared or owned in fractional portions on a digital platform.
Imagine a property valued at $1 million. Traditionally, it's challenging for multiple investors to own portions of this real estate unless they establish some complex legal and trust structures. Tokenisation changes this.
By converting the property’s value into 1 million individual tokens (or any other specified number), each token represents a 0.0001% stake in the asset. These tokens can be traded, bought or sold, granting individual investors the ability to own a piece of the property without ever physically "owning" it in the traditional sense.
Want to learn more? Read our CEO, Matt Ong's piece in Forbes here.