Asset tokenization is the act of digitizing the ownership of an asset. At a very high level, it is not that different from the way your bank manages your checking account. Your bank doesn’t have a vault stuffed with your cash in it. Instead, it has a computer with a series of 1s and 0s representing your cash balance. Banks essentially digitize our money. Digital asset tokens represent real-world assets, just as the banks’ 1s and 0s represent your cash. The range of assets that can be tokenized is limitless.
Here are the key benefits of digital tokenization:
- Better liquidity
- More transparency
- Around-the-clock market access
- Cost-effectiveness
- Fractionalization
- It makes capital markets more inclusive for funders and investors
- Enlarge the pool of investable assets
As judged by the benefits, digital tokenization is a significant upgrade from the current financial system. However, despite the promising outlook, the adaptation process is slow. For the token market to compete against traditional capital markets, more explicit regulations and a greater understanding and trust of the blockchain among retail and institutional investors and the government are required. It will be incumbent on the government, financial industry, and investor alliances to form guidelines, regulations, and governance to help create a solid and trustworthy foundation.
The economic benefits of tokenization are massive. Financial markets for liquid and illiquid assets will be more efficient, cheaper to fund and transact in, and less exclusive. If tokenization takes off as we think it can, the benefits could be substantial for the capital markets, but much more importantly, the economy and the nation’s populace.
https://realinvestmentadvice.com/resources/blog/tokenization-the-new-frontier-for-capital-markets
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