1st September 2023 > > Tokenisation.

tl;dr

Tokenisation is another example of real-world crypto adoption.

Market Snap

Market Wrap

The SEC has delayed its decision on all BTC spot ETF applications, which seems to have taken the market by surprise, which is curious. We already know that the SEC is in a public consultation process, to which it is scheduled to respond by 6th October. This suggests that there is some hot, frothy, money in the mix, which needs to be shaken out.

Occasional Series – Let’s not go there

Oh well, sometimes I just can’t help myself.

Nicola Sturgeon, the whole of the SNP, legions of socialist activists, Sir Ed Davey, and - until very recently - Sir Keir Starmer (who flip-flops on these matters on a regular basis) all support alleged paedophile Dominic Carter’s desire to be recognised as a woman, and to be allowed access to changing rooms and toilets currently reserved for the fairer sex, and their daughters.

Though it may be unfashionable to say so, I must admit I harbour some doubts that these three politicians have got this quite right.

Time to put on my tin hat, I guess.

Curious Cryptos’ Commentary – Tokenisation

Tokenisation is the concept of taking real-world assets and representing a portion of them on the blockchain.

Shares were originally a physical form of tokenisation (your share certificate represented ownership of a specific percentage of a limited company) and are almost entirely now a digital form of tokenisation. The huge productivity gains in the administration of shareholdings by moving from bits of paper to bytes of data should not be underestimated.

Moving representations of real-world assets to the blockchain offers not only even greater savings in the administration of investments, but intriguingly offers the potential for opening all possible investments to a much wider audience.

At the turn of the Millenium, online brokerages were few and far between. I dimly recall having a Charles Schwab account which was clunky and difficult to operate. Now, interactive investor provides a fine front-end to manage one’s personal stock and bond investments, along with dividends, interest payments, corporate actions, and any other stock related activity.

The prospect of adding blockchain functionality to centralised operations like ii not only gets me excited, but also Larry Fink, CEO of the world’s largest asset manager, Blackrock. He described tokenisation as “the next generation of markets”. This might go some way to explain Blackrock’s interest in launching a BTC spot ETF.

Larry is not the only one who concurs with the CCC. A survey by BNY Mellon concluded that 97% of institutional investors agree that “tokenization will revolutionize asset management” and be “good for the industry”:

https://www.bnymellon.com/content/dam/bnymellon/documents/pdf/insights/migration-digital-assets-survey.pdf

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Let us not underestimate the technological challenges, and the legal and regulatory challenges to the development of the tokenisation industry. But let us also not underestimate the rapidity of change, particularly in the financial world.

Swift have announced the successful conclusion of a project to test the technological requirements for tokenisation across public and private blockchains, accessible by centralised institutions such as Swift and banks:

https://www.swift.com/news-events/press-releases/swift-unlocks-potential-tokenisation-successful-blockchain-experiments

Tom Zschach, Chief Innovation Officer at Swift, explains:

“Interoperability is at the heart of everything we are doing at Swift to facilitate the seamless flow of value across the world in the face of increasing fragmentation. For tokenisation to reach its potential, institutions will need to be able to seamlessly connect with the whole financial ecosystem. Our experiments have demonstrated clearly that existing secure and trusted Swift infrastructure can provide that central point of connectivity, removing a huge hurdle in the development of tokenisation and unlocking its potential.”

Participants included BNP, ANZ, Clearstream, Euroclear, DTCC, SDX, and oracle provider Chainlink.

The first five are all heavyweights in the TradFi world (I have not come across SDX before today). LINK (the native token of Chainlink) has long been a core alt asset of the CCC Treasury.

The TradFi enthusiasm for embracing blockchain technology is a strong word of warning to the naysayers.