How Tokenization will Facilitate Transactions in Capitals Markets?

How Tokenization will Facilitate Transactions in Capitals Markets?

By Capital Markets CIO Outlook | Friday, November 08, 2019

Tokenization is a promising blockchain application for capitals markets, opening the sector for the masses.

FREMONT, CA: Capitals market is a dynamic sector that involves complex and slow business processes. The present model is still working on the conventional systems that were set up in the past. Further, tokenization, which comes under the umbrella of blockchain Technology, can streamline the transactions and asset allocations in the capital markets. Tokenization is simply the conversion of a property or an asset into a digital token that exists on the blockchain. Tokenization can have a massive impact on investment and trading. Tokenization also promises increased liquidity, transparency, exchange potential, and data integrity.

Tokenization has the potential to increase asset value over a period of time. Here is an example to demonstrate the above statement. Let’s assume a property has a current market value of $300,000. The property owner decides to tokenize the property to raise capital. Asset tokenization will convert the property into digital tokens. Considering each tokenized share is worth$30, each token will represent 0.01 percent shares of the entire asset. Investors interested in buying the digital shares will do so through a blockchain network. Thus, tokenization of the property will open up investment opportunities for common masses. The entry of new players will increase supply and consequently result in the property price to go higher owing to an increase in the availability of capital.

Currently, big value investments such as gold, real estate properties, and fine art pieces are limited by geographical region as well as the wealth availability of the individuals. Tokenization will remove the limitations due to territorial borders and financial statuses. For instance, an investor from Hong Kong will be able to invest in a building in New York accompanied by absolute security and ease of transfer ensured by the blockchain network. Further, tokenization will also eliminate the middlemen, such as third-party brokers. The investment profile will gain on diversity as tokenization will allow the investors to invest in various markets. The fractional ownership of various properties will allow the investors to distribute risks across the diversely owned assets.

Blockchain is the future of several industries, and the capitals market is one sector that can gain immensely from its advancement.

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