Asset Tokenization Process?

What is the process of Asset Tokenization ?

About the Author
Fahad is a Senior Islamic Banker and has set up Islamic Banks in various geographies, including Sub-continent, Africa, and Far-east.
Asset Tokenization Process?

Security Tokens are digital representations of tangible (physical) assets on distributed ledgers or the issuance of traditional asset classes in tokenized form. 

We see that the tokenization of assets is becoming one of the most explored use cases of DLT (Distributed Ledger Technology) in financial markets. At the same time, most DApps are in pilots or at the experimental stage; they are targetting tokenization of securities (e.g., stocks and Sukuk), but also commodities (e.g., gold, silver) and other non-financial assets (e.g., real estate, natural resources).

In the first case, the economic value and rights derived from pre-existing tangible or real assets are linked or embedded by convention to DLT-based tokens, acting as a store of value. Tokens issued exist on the chain (‘digital twin’), while the real assets on the back of which the tokens are issued continue to live in the “off-chain” world.

In the second case, asset tokenization involves the creation of a trading instrument through a blockchain and issuing tokens that are ‘native’ to the Blockchain, built directly on-chain, and living exclusively on the distributed ledger.

When we say Native, it means security Token built on Blockchain (e.g., tokens built on ERC-20, BEP-20, and TRC-20 token standards, respectively.)

The first case can be implemented easily by comparing the second one because it's very near to the regulatory environment today.

Anyhow the business opportunity is huge, the newly-published report by global consulting firm BCG and ADDX, the digital exchange for private markets forecasts that asset tokenization will expand into a US$16.1 trillion business opportunity by 2030. This growth comes as the crypto winter prompts capital to focus on more viable blockchain use cases.


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