According to Bloomberg, cryptocurrencies were invented during the 2008-2009 financial crisis to provide an alternative to banks. Today, many banks and financial institutions on Wall Street are not only involved in the cryptocurrency business, but are also beginning to adopt blockchain technology.
“Tokenization of real-world assets” is the representation of assets such as bonds, stocks, artworks, or even ownership shares of office buildings as digital tokens on the blockchain. Token holders own the assets, and ownership can be easily transferred by moving tokens.
The tokenization process can eliminate transaction settlement delays and enable assets to be split and traded during off-market hours by recording ownership and transfer conditions on the blockchain. Tokens can also be programmed to automatically perform certain actions.
While U.S. banking regulators have yet to approve innovations such as deposit tokens, regulators elsewhere are open to tokenization, which could allow some companies to disintermediate roles such as broker-dealers.
Banks are developing private blockchains to ensure the uniqueness and security of asset records. As banks invest more in features, it is only a matter of time before blockchain technology is widely used.
