Will ALL Assets Become Tokenised?

“Everything will be tokenised” is a statement that is growing in popularity. We're on track towards a world where everything that can be, will be tokenised. This trend comes particularly after central banks globally progress past the "exploratory" phases of Central Bank Digital Currencies (CBDCs) into building real infrastructure. 

We have explored CBDCs here before, but to catch everyone up quickly, from the Reserve Bank of Australia:

“A CBDC would be a new digital form of money issued by the Reserve Bank. It could be designed for retail (or general purpose) use, which would be like a digital version of banknotes that is essentially universally accessible, or for wholesale use, where it is accessible only to a more limited range of wholesale market participants for use in wholesale payment and settlement systems.”

CBDCs may trigger a systemic shift towards shifting ALL asset ownership, all built on blockchain technology.

The next phase for blockchain technology is bridging real-world asset ownership to blockchain – unlocking new opportunities and reducing inefficiencies in the real world. The visionaries who build upon the foundations will transform the space, solving not only problems in crypto but in the real world too.

We can already see this next frontier being developed. One example of real-world assets being bridged into the highly interoperable tokenised world is our very own Gold & Silver Standard – where we tokenise gold and silver in various forms. Something previously impossible with physically-backed gold and silver is lending and earning interest – often gold's biggest criticism is that "you can't earn a yield." Well, now you can use DeFi lending to extract a yield.

So what else can be tokenised?

• Assets: Cash and property, as well as business assets - assets that are present on the balance sheet.
• Equities: Equity (shares) can be tokenised. This is already being done on some crypto exchange platforms.
• Funds: An investment fund is a type of asset that investors can tokenise — these tokens represent an investor's share of the fund. Each investor is provided tokens that represent their share of the fund.
• Services: A business can offer goods or services. Investors can use tokens to purchase goods or services provided by the supplier. E.g., Tokenising gift cards.

With accelerating digitisation, tokenisation innovations can have an even greater impact on how we store wealth for future generations to come - whether that means by transforming traditional drivers like network effects or trade linkages between countries' economies.

Future innovations using tokenisation, such as DeFi lending/borrowing, fractional ownership, crowdfunding, and more, have the potential to transform many, if not all industries. There will be many other developments in this decentralised economy that have yet to be imagined. What we can say is that it will be a much more transparent and direct type of market than what we are used to.

Assets that can't be liquidated often have an unestablished market price. In this case, asset owners typically provide buyers with incentives like illiquidity discounts, which reduce the asset's price. Tokenization of assets would increase an asset's liquidity, as it facilitates fractional ownership, which eliminates illiquidity discounts. Moreover, selling small fractions of ownership enables owners to charge a fair market price.

Another example of tokenising assets is real estate. Using blockchain technology, tokenisation promises to turn the notoriously illiquid asset of property into a highly tradeable digital share.

Exchanging real estate on a blockchain platform will reduce the costs associated with a particular real estate investment. Through tokenisation, investors can purchase and sell the digitised asset without incurring closing costs, which reduces transaction costs substantially.

Tokenisation in real estate has also yielded the positive outcome of fractional and divisible ownership. The value of real estate has traditionally been indivisible as it is treated as a single asset. Tokenisation makes it possible to fractionalise the asset, leading to greater access thereto and better liquidity of the investment.

Real and digital assets are becoming one. Tokenisation democratises access to markets while ensuring fairness and security. The only obstacle today is legal boundaries — to what extent this hurdle stands in the way depends on the type of assets being tokenised.

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