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In recent years, the digitalisation of the global economy has pushed companies and institutions towards digital solutions and emerging technologies to improve legacy systems.
“Tokenisation is beneficial for moving liquidity through fractionalisation and the use of smart contracts to automate process flow and increase efficiency. Moving to tokenisation is a tech upgrade especially for the Asian bond markets,” HSBC’s Zhu Kuang Lee said on Tuesday at the EY APAC Blockchain Virtual Meetup, when asked if tokenisation can be a part of the future strategy of traditional financial institutions.
“The opportunities are limitless in terms of the type of tokenised asset or product that can be created…In 2021, we’ve seen the rise of NFTs – a US$37 billion market including tokenised art, games, tweets and more. It’s a reflection of a market that is embracing tokenisation as a means to monetise. This is why big financial institutions are trying to look towards tokenised assets as the next step”, he said.
According to Lee, fractionalisation can also facilitate financial inclusion, as it improves access to investment opportunities for a much wider investor base, particularly in Asia.
“Asia is an ideal testbed for tokenisation and it’s home to a population that will benefit from the increased transparency and accessibility to the securities market. If you look at APAC, it’s home to around 90% of the 2.4 billion new members of the middle class that are entering the global economy. The bulk of that growth will come from the developing markets of China, India, and Southeast Asia”, he explained.
Lee also noted that the APAC has the largest amount of internet users, adding that it’s a population that is “increasingly comfortable with cryptocurrencies and cashless payments.”
Tokenising tangible assets
While the tokenisation of digital assets such as non-fungible tokens (NFTs) are already gaining mainstream popularity, less is known about the tokenisation of physical assets.
Oi Yee Choo, CEO of Singapore-based private market investing firm ADDX, said that she has seen “new use cases on alternative assets” that have approached the company to talk about “what might be next in the investable universe”.
“It’s not just about traditional securities and funds, but moving on to things luxury collectibles like wine, art and cars – how do they think about tokenising some of that for investment purposes”, she said.