INTRODUCTION

The tokenisation of real assets is revolutionising the financial industry and other sectors by offering new forms of investment and asset management. It is becoming an important part of the financial landscape, with forecasts indicating that it could account for up to 10% of global GDP by 2030.

The tokenisation of real assets is an innovative process that uses blockchain to transform tangible assets into digital assets, offering new benefits and challenges in investment and asset management.

WHAT IS TOKENIZATION?

Tokenization of real-world assets refers to the process of converting ownership or rights to a physical asset into digital tokens on a blockchain or distributed ledger. In simpler terms, it involves representing ownership of tangible assets, such as real estate, bonds, shares, art, commodities, or other valuable items, as digital tokens on a blockchain.

The traditional ownership of real-world assets often involves complex and time-consuming processes, such as paperwork, intermediaries, and legal procedures. Tokenization aims to streamline and simplify these processes by leveraging blockchain technology.

Tokenization offers several potential benefits, including increased liquidity, fractional ownership (allowing smaller investments in high-value assets), and easier transfer of ownership.

Overall, tokenization of real-world assets represents a significant innovation in finance and investment, aiming to make traditionally illiquid assets more accessible and efficient.

WHICH ASSETS ARE ELIGIBLE FOR TOKENIZATION?

  • FINANCIAL ASSETS
    • Equity (shares)
    • Debt (bonds)
    • Funds
    • Commodities
    • Structured products
    • Actively Managed Certificates
  • REAL ESTATE
    • Commercial
    • Residential
    • Real estate debt
    • Land
    • Real estate development projects
  • DATA
    • Personal
    • Financial
    • Energy
    • IoT
  • COLLECTIBLES & ART
    • Fine Art
    • Rare Books, Coins or Stamps
    • Cars
    • Watches
    • Jewellery
    • Handbags
  • INFRASTRUCTURE
    • Energy infrastructure & renewables
    • Transportation infrastructure (e.g. airports)
    • Oil & gas fields
    • Water and wastewater infrastructure
    • Communication infrastructure
    • Credit carbone
  • ENTERTAINMENT & GAMING
    • In-game assets and virtual goods
    • Intellectual property and royalties
    • Gaming platforms and infrastructure
    • Esports and event-based tokens
    • Digital art and non-fungible tokens (NFTs)

WHAT ARE THE BENEFITS OF TOKENIZATION?

Tokenization offers several benefits across various domains:

Improved Security and Fraud Prevention
In the context of data security, tokenization replaces sensitive data with tokens, enhancing security and making the data useless to cybercriminals in case of a breach.

Greater Accessibility and Liquidity
Tokenization makes it easier for novice investors to participate in large-scale projects, provides greater liquidity, and enables fractional ownership of traditionally illiquid assets like real estate, thereby opening up investment opportunities to a wider audience.

Transparency and Efficiency
It creates an immutable and transparent record of transactions, leading to increased transparency, reduced fraud risk, and more efficient and secure investment processes.

Increased Efficiency
Tokenization enables faster and more efficient transactions by eliminating the need for intermediaries, reducing settlement time, and lowering transaction costs.

Enhanced Customer Experience
In the context of e-commerce, tokenization improves the customer's payment experience by allowing for future purchases without repeatedly entering card details.

These benefits span across industries, including finance, investment, e-commerce, and data security, making tokenization a valuable tool for enhancing security, accessibility, and efficiency.

SWISS STANDARD FOR SECURITIES TOKEN

In Switzerland, an association called Capital Market Technology Association (CMTA) has been created to establish a Swiss standards for the issuance of securities token, in particular for the tokenizing of equity and bonds securities in Switzerland.

The CMTA was established to promote the transparency and reliability needed to use DLT for financing purposes. One of the main objectives of the association is to promote the issuance and trading of traditional capital market instruments such as equity or debt securities in the form of digital tokens. The CMTA also seeks to adopt standards and systematize good practices at the regulatory, accounting and technical levels, in order to facilitate the treatment of digital assets by financial intermediaries.

OA Legal is one of the legal expert designated by the CMTA to deliver legal opinion for issuers seeking to issue securities token in accordance with the Swiss standards. We are currently working on the tokenization of an actively managed certificate with cryptocurrencies as underlying assets.

SWISS REGULATED SECURITIES TOKEN EXCHANGE

Switzerland is known for its favorable regulatory environment towards blockchain and cryptocurrency activities, and there have been initiatives to establish regulated platforms for tokenized securities.

The Swiss Financial Market Supervisory Authority (FINMA) has granted this year the first ever securities token exchange licence to operate a trading venue based on distributed ledger technologies for retail investors, which is a world premiere (!) With this licence, a closely knit value chain ranging from issuance through the trading of tokenised assets has been facilitated for retails investors for the first time in the Swiss financial centre.

Now, with the Swiss standard for legal documentation supporting the tokenization of real-world assets and financial products combined with the Swiss regulated securities token exchange, it has never been so easy to issue securities token and to trade them on a fully compliant online platform.

OA Legal assist clients in every step of DLT project for the tokenization of real-world assets and financial products. We assist you in providing the relevant legal documentation and expert opinion as well as structuring efficiently the tokenization of the assets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.