HSBC's recent announcement of retail gold tokens demonstrates the growing popularity of financial asset tokenization.
However, challenges remain in achieving standardization and broader integration.
Asset #tokenization uses #blockchain technology to represent ownership of real assets (e. g. , real estate, artwork, stocks) in the form of digital tokens that can be used for transactions. These tokens act as digital certificates of ownership and allow for fractional ownership. This will lead to a broader investor base, increased trading activity and increased market liquidity.
According to Ralph Kubli, director of the #Casper Association, the biggest limitation of many existing tokenization platforms is their narrow scope.
However, the reliance on manual cash flow calculations negates the efficiency and automation that tokenization promises. The lack of transparency and verifiability of cash flows poses a serious risk - the same serious vulnerability identified during the 2008 financial crisis.
"Current projects do not define the cash flows of the underlying financial instruments in machine-readable and machine-executable statements of work.
"This means that we continue to face the same risks that have plagued the financial industry for years. In particular, it's the overall work needed to harmonize.
Kubli offers a clear solution. It is to have all cash flows in these assets deterministically determined by algorithms.
This would require the development of "smart financial contracts. " These contracts would not only simply encrypt information about the tokenized assets, but would also clearly define all payment obligations of the parties involved. In this way, it will be possible to comprehensively define both the assets and liabilities of a financial instrument.
Fortunately, such standards already exist.
Today, ACTUS is creating and implementing an open source standard that can be used by any company.
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