…In simple terms, tokenisation refers to the process of representing ownership of real-world assets digitally on a blockchain.
…Tokenisation represents more than just a passing trend; it signifies a fundamental shift in how we perceive and trade financial assets.
By Rebecca Ellis
SAT, MAR 30 2024-theGBJournal| As we start the Easter Weekend and prepare to conclude the first quarter, it is an opportune moment to ponder on the year ahead.
Amidst the enjoyment of chocolate Easter treats, let’s take a look towards an investment subject that may appear somewhat unconventional, perhaps even futuristic.
Tokenisation is the latest buzzword making waves in financial circles, especially since Blackrock’s recent move to seek approval of its USD Institutional Digital Liquidity Fund.
This fund, in partnership with Securitize, aims to digitalise real assets, potentially revolutionising how we perceive and trade financial instruments. In simple terms, tokenisation refers to the process of representing ownership of real-world assets digitally on a blockchain.
In this article, we delve into whether this development is mere hype or the precursor to a transformative revolution.
What are The Past Revolutions?
Let’s take a tour of the past revolutions and their impact:
Industrial Revolutions: From the late 18th century to the 1920s, the Industrial Revolution transformed economies, shifting from rural to industrialised, powered by machinery and mass production. This granted us with harnessing electricity, electrical motors, the telegraph and telephones.
Globalization: Starting in the 1960s, globalization interconnected economies, facilitating trade, investment, and cultural exchange, leading to resource efficiency and expanded markets. This contributed to the rise of Vietnam, Taiwan and China becoming the factories of the world.
Information Technology Revolution: The late 20th century saw the rise of computers and the internet, revolutionising communication, data processing, and automation. This revolution delivered one of the most iconic inventions “The Internet” which is at the core of today’s continued revolutions This has provided the opportunity for Apple, Amazon and Google to become household names.
Digitalization and IoT: Automation and digitalization across industries have enhanced efficiency and reduced costs, with technologies such as smart homes, and autonomous robots and reducing time-heavy tasks with software advances. The ever-evolution has now brought AI and data analytics driving innovations to reduce time-heavy tasks. This has brought companies such as Microsoft with ChatGPT and Nvidia to become market leaders.
Sharing Economy: Platforms like Airbnb and Uber disrupted traditional industries by optimising underutilised assets, leading to resource efficiency and new income streams.
Renewable Energy Transition: The shift towards renewable energy sources has disrupted the energy sector, driven by technological advancements and supportive policies, with companies like Tesla at the forefront.
These past revolutions set the stage for ground-breaking transformations in various sectors. Now, let’s explore whether tokenisation is poised to be the next game-changer.
Is Tokenisation a Game-Changer?
Blackrock’s vision for tokenisation suggests a paradigm shift in finance, very much as we have seen the adoption of ESG and ethical investing which has become a key component in investment selection. Blackrock CEO Larry Fink revealed his and his firm’s vision for the future of finance:
“In terms of the beginnings of a Bitcoin ETF, we think ETFs are a technology, just as Bitcoin was an asset storage technology. We believe that the next step will be the tokenization of financial assets. This means that every stock, every bond will have its own QR code. They will appear in a single ledger. Every investor, you and I, will have our own number, our own identification. We can get rid of all the problems associated with illicit activities involving bonds, shares and digital thanks to tokenization. But most importantly, we’ll be able to customize strategies through tokenization to suit each individual. We’d have instant settlement. Think of all the costs involved in settling bonds and equities. But with tokenization, everything would be immediate, because it’s just a line item. So we think this is a technological transformation for financial assets. I think you mean voting, voting choice and all those things. If we know at all times who the owner of that share is, and it’s time to vote, each individual owner is identified, and they can vote for their own shares.”
Where assets are digitised, enhancing transparency, efficiency, and personalisation. This sentiment is echoed by leading institutions like the IMF, BIS, and Swift, signalling a tangible move towards a tokenised future. Tokenisation has the potential to streamline financial processes, reduce costs, and empower investors with greater control over their assets.
How to Get Involved
For those looking to capitalise on the rise of digital assets, consider allocating to sectors key in these developments, such as chipmakers, blockchain, and proxy to companies at the forefront of this evolution through ETFs focused on these digital themes. Depending on your risk profile, allocating 3-12% to this theme could offer exposure to potential growth opportunities. Platforms like Coinbase, Krakin or Binance offer easy access to digital assets for retail investors, while institutional investors may explore avenues like tokenised securities or blockchain-based investment platforms.
Our Conclusion
Tokenisation represents more than just a passing trend; it signifies a fundamental shift in how we perceive and trade financial assets. With institutional backing and global initiatives driving the adoption of digital currencies, the reality of tokenisation is not a distant dream but a revolution unfolding before our eyes. Now is the time to explore and engage with this transformative theme within your portfolio.
If you would like to learn more, please feel free to drop a line to organise a chat.
Until next time, Enjoy the long weekend and Happy Easter!
…Rebecca Ellis, Family office advisor based in Geneva, Switzerland|Contact:re@aktspartners.ch
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