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Reclaiming Tokenisation: How to Avoid a TradFi Takeover
Tokenisation is at a crossroads. The awareness of tokenising assets has spread beyond the crypto world, and traditional finance giants are taking notice. Governments in key financial hubs have set up sandboxes to explore how blockchain technology can enhance capital markets infrastructure. While these developments may seem encouraging, they also pose significant risks if not managed properly. It is crucial that we avoid a takeover by traditional finance (TradFi) institutions, which could stifle the potential of tokenisation to democratise access to capital.
A recent pilot involving Siemens and the European Central Bank has garnered attention, showcasing a $330 million digital bond issued via blockchain technology. While this achievement demonstrates the efficiency of digital transactions, it also highlights concerns that the industry may be veering off track. A tokenised bond being settled on a private blockchain, facilitated by Deutsche Bank, is not what tokenisation should be about.
Tokenisation’s core promise lies in disintermediation – streamlining archaic processes and empowering users. It should replace outdated systems involving transfer agents, central depositories, clearing systems, and custodians with faster, cheaper, and more transparent blockchain-based solutions. Furthermore, it offers investors greater flexibility, including lower entry points compared to traditional markets.
If tokenisation is commandeered by the TradFi powers that be, we risk losing the essence of disintermediation. The industry will be stuck in a world where tokenised versions of complex investment products are properly regulated, but retail investors will still face significant barriers to access.
For regulators, it is essential they grasp the larger vision of tokenisation. While ensuring sophisticated investment products have appropriate oversight, we must also provide clarity on how these products can be made available to any retail investor, regardless of their financial situation.
Tokenisation presents a once-in-a-generation opportunity to democratise capital access. It would be a tragedy if this chance is squandered due to regulatory indifference or a lack of vision. The fate of millions of underbanked individuals and businesses worldwide hangs in the balance.
By embracing tokenisation’s true potential, we can unlock a future where anyone, regardless of their financial means, can participate in the global economy.
Source: https://blog.bitfinex.com/bitfinex-securities/reclaiming-tokenisation-how-to-avoid-a-tradfi-takeover/
