How can companies drive the tokenization of assets?

Promising opportunities for startups and conventional financial institutions. In today’s digital and globalized world, companies such as financial institutions are under strong pressure to reduce costs and optimize business. Many are embracing digital solutions and emerging technologies as a way to create new revenue streams and optimize existing legacy systems.

While some digital solutions can simply be adopted by businesses and existing regulatory frameworks, others require a deeper understanding of the underlying technology and associated implications. Tokenization converts (real-word or virtual) asset rights into a unique digital representation – a token. While the basic concept of digitalization is not new, distributed ledger technology (DLT) like blockchain adds an additional dimension. The process of tokenization is promising in that it creates a bridge between real-world assets and their trading, storage and transfer in the digital world. 

The benefits of tokenizing assets are manifold. From higher cost efficiency to leaner trade financing options, there are various opportunities. At the same time, it’s important to address certain challenges. Asset tokenization is not the future – it’s the present. This deeply transformative innovation offers promising possibilities for financial markets. Despite an exponentially increasing interest in tokenized assets, conventional financial institutions and competent authorities are still cautious in their approach to asset tokenization. We need jurisdictions like Switzerland, well-known for its innovation-friendly stance, to help drive and foster the remarkable potential of tokenized assets. The innovational spirit, quality of life, size and supportive tax and regulatory environment make Switzerland an attractive hub for innovative endeavors.

StableCoins and CBDCs

The value of StableCoins is frequently linked to an underlying asset. The usual objective of such projects is to minimize price volatility typical of currently available tokens. StableCoins are not necessarily subject to reduced price volatility, nor are they per se safe investments. The risks for investors are always dependent on the specific product and the exact structure. The requirements under supervisory law may differ depending on which assets (e.g., currencies, commodities, real estate or securities) back the StableCoin and on the legal rights of its holders.

Central bank digital currencies (CBDC) are a new form of currency issued digitally by central banks. Currently many central banks are exploring ways to launch their own CBDC, either wholesale or retail.