Tokenization is the process of transferring the turnover of material values or traditional financial assets to the blockchain. Both financial instruments (currencies, stocks, derivatives) and tangible assets – real estate, gold, works of art, etc. can be tokenized. One of the main difficulties of the tokenization process lies in its legal justification.
The first tokenized assets based on cryptocurrencies were stablecoins – traditional currencies transferred to the blockchain, primarily the US dollar. The USDT stablecoin on the Bitcoin Omni sidechain was launched in 2013. The tokenization of other assets gained wide popularity only in 2017-2018, during the first ICO boom.
During the first wave of ICOs, as a rule, unsecured tokens were sold, but there were first attempts to tokenize real estate and gold. Later, to increase investor confidence, the digital securities issuance form (STO) and its simplified version SAFT were developed. Since 2018, cryptocurrency exchanges have begun to launch trading in tokenized shares of large companies, primarily from the US stock index S&P 500.
The tokenization of art objects, both digital and classical, has unfolded with the advent of non-fungible tokens (NFTs). Each token can represent on the blockchain both the whole work and its part, that is, it allows shared ownership, which is not practiced in traditional auctions. In 2021-2022, tokenization of works of art through NFT has become the fastest growing trend, ahead of all other types of assets.
One of the largest markets for tokenization has become the DeFi industry. In fact, any asset traded on DeFi platforms is a tokenized version of a cryptocurrency or stablecoin. Futures trading in the form of tokens is also widespread.
The Russian DFA law, which came into force in 2021, almost does not affect cryptocurrencies and is aimed specifically at tokenizing real assets or issuing new ones in digital form. The first Russian CFAs were futures contracts for metals of MMC Norilsk Nickel.
Source: Bits
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