A new report by blockchain oracle network Chainlink is urging asset managers to embrace the “sizable” opportunity presented by tokenization, a process of converting traditional assets into digital tokens on a blockchain.
Titled “Beyond Token Issuance,” the report explores the potential benefits of tokenization for asset managers. These benefits include:
- Unlocking Dormant Capital: By creating a more liquid and accessible market for assets, tokenization can free up capital currently tied up in illiquid investments.
- Enhanced Availability: Tokenization can make assets more readily available to a wider range of investors, potentially boosting investment opportunities.
- Novel Revenue Streams: Tokenization opens doors for innovative revenue models, such as fractional ownership or automated fee structures.
- Unified Portfolios and Risk Management: Tokenization allows for more efficient portfolio management across different asset classes and potentially improves risk assessment through automation.
The report argues that blockchain technology is rapidly becoming an “integral component” of the financial system, blurring the lines between traditional and blockchain-based assets. This trend, fueled by ongoing digitization, reflects the advantages of blockchain infrastructure for secure and efficient asset storage and transactions.
Moving Beyond the Prototype Stage
Ryan Lovell, Director of Capital Markets at Chainlink Labs, acknowledges that tokenization has been in a developmental phase, with institutions primarily focusing on basic token issuance and exploring its potential impact.
“It’s like building a concept car without an engine or interior,” Lovell explains, highlighting the need for a more robust infrastructure.
The next phase, according to Lovell, is building a foundation that allows tokenized assets to be interoperable and programmable across various platforms, including traditional systems and private and public blockchains.
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Unlocking Powerful Applications with Real-World Data
Chainlink believes that enriching tokens with real-world data and enabling interoperability across different systems unlocks a world of possibilities. These applications promise greater transparency, lower costs, and a significant streamlining of administrative processes when compared to traditional financial infrastructure.
“We’re actively working on initiatives that empower institutions to move beyond mere token issuance,” says Lovell. These efforts aim to equip asset managers with the tools to manage tokenized assets throughout their lifecycle and participate in the cross-chain economy.
Chainlink’s report serves as a call to action for asset managers, urging them to actively explore the opportunities presented by tokenization in this evolving financial landscape.
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