Asset tokenization in the new digital economy

In this context, the 2023 World Economic Forum will discuss different applications of decentralized ledger technologies, such as Web3 and asset tokenization, and their role in the new digital economy.

Alexandre Ludolf
Jéfferson Colombo

“Despite recent turbulence in the world of crypto assets, asset tokenization and the use of blockchain technology are expected to grow in the coming years. In this context, the 2023 World Economic Forum will discuss different applications of decentralized ledger technologies, such as Web3 and asset tokenization, and their role in the new digital economy.”

The market for digital assets such as coins, utility tokens and other types of native tokens has gained a lot of traction, and the current market capitalization of approximately US$800 billion, even after a significant drop in prices in recent months, reflects the great potential of this technology. However, native tokens – digital currencies intrinsically linked to a specific blockchain, typically used to reward miners or validators of transactions registered there – represent just a small fraction of the full potential that decentralized technologies may achieve.

The main value of decentralized ledger technologies (DLTs) lies in transforming the way ownership or custody of any asset is defined, protected and traded. This process has the capacity to replace the role of traditional centralized entities that, in conventional socioeconomic frameworks, tend to act as guarantors of these assets and rights.

Tokenization is a process that consists of creating a digital representation of an asset, which can be easily negotiated, split up and traded on a blockchain network. The market for the digital representation of real assets has advanced by leaps and bounds in Brazil and around the world, and it is now used with tangible assets such as real estate, vehicles and works of art. Its great advantage is making the market for trading these assets more accessible and liquid. In addition, tokenization can be used to facilitate the management and transfer of intangible assets such as copyrights and royalties. However, it is in the realm of financial services, such as settlement and trading infrastructure, that this technology has shown the greatest promise, demonstrating properties superior to existing technologies.

For financial institutions, using tokenized versions of traditional financial instruments can improve operational efficiency and ensure the finality of transactions and their independent auditability. These characteristics are essential to expand the supply and scope of financial services and reduce information asymmetry between entities and customers.

To give some concrete examples, global financial institutions such as Société Générale, HSBC, Standard Chartered, JP Morgan, DBS and SBI have offered tokens backed by different assets over the last 12 months. In addition, several other banks are running pilot projects in areas such as decentralized finance applications, public and private bond offerings, tokenization of fiat currencies and even asset management products.

Despite their rapid growth, asset tokenization markets are still very small compared to conventional analog assets. As a measure of magnitude, the Total Value Locked (TVL) of real assets on the Ethereum network amounted to US$612 million at the end of 2022 (down from a peak of US$1.75 billion at the end of the second quarter of 2022). The adoption of this technology still faces various regulatory and technological barriers.

In Brazil, the Brazilian Securities and Exchange Commission (CVM) is running a tokenization regulatory sandbox, allowing pilot projects to issue tokens representing securities within an environment regulated and monitored by it. This is the first step toward building standards that will enable widespread regulated tokenization in Brazil. Now, at the start of 2023, there are already digital representations of fund shares, debentures and real estate, all operating within the sandbox environment. In addition, there are multiple tokenizers focused on issuing digital representations outside the regulated environment.

Therefore, despite enormous challenges in the technological and regulatory spheres, the potential for tokenizing assets is immense. A recent survey conducted by Bakkt (the tokenized asset exchange of the ICE group, which owns the New York Stock Exchange) shows that despite the recent FTX scandal, the prevailing view among American users and curious people is that cryptoassets represent the next big advance in modern finance. In this context, the next meeting of the World Economic Forum, to be held in January 2023, will address many topics related to blockchain applications and their role in the new digital economy. All the signs point to huge scope for asset tokenization, and this could be the registration, trading and settlement infrastructure of the future.

*As opiniões expressas neste artigo são de responsabilidade exclusiva do(s) autor(es), não refletindo necessariamente a posição institucional da FGV.


  • Alexandre Ludolf

    Professor convidado do Mestrado e Doutorado Profissionais (MDPE) da FGV EESP, onde leciona a disciplina de Criptofinanças e Sócio e CIO da QR Capital. Engenheiro pela PUC-Rio e Mestre em Economia pela FGV, com 18 anos de experiência como gestor de fundos de investimento e passagem por diversas instituições como Santander, Safra e Mirae Asset. Possui vasta experiência na gestão de fundos de investimento e é um entusiasta de tecnologia, investidor de ativos digitais e startups.

  • Jéfferson Colombo

    Professor de Finanças na Escola de Economia de São Paulo (FGV EESP). É economista e possui Doutorado em Economia Aplicada pelo PPGE/UFRGS (2016), com período sanduíche realizado na Universidade de Illinois em Urbana-Champaign. É membro fundador do International Finance and Banking Society (IFABS) na América Latina, coordenador da FGV junto ao University Blockchain Research Initiative (UBRI), e vice-coordenador do Mestrado e Doutorado Profissionais em Economia da FGV EESP (MPE/DPE). É também Pesquisador Permanente do Centro de Estudos Quantitativos em Economia e Finanças da FGV (CEQEF/FGV) e líder de projeto de pesquisa financiado pelo CNPq.

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