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BMCP.live Recap: Tok­eniza­tion 2021 – Uni­fy­ing the Ecosystem

Fol­low­ing the last Fire­side chat in March, the top­ic of uni­fy­ing the tok­eniza­tion ecosys­tem will con­tin­ue to loom large in 2021. Fea­tur­ing a CEO pan­el of top-rank­ing inter­na­tion­al com­pa­nies, the last BMCP.live event pro­vid­ed inter­est­ing insights into the obsta­cles the com­plex ecosys­tem still needs to over­come to ful­ly emerge into pub­lic and pri­vate mar­kets. From plat­forms and pri­ma­ry mar­kets to exchanges and cus­tody solu­tions, the key pieces that are often still miss­ing are clear and appro­pri­ate regulations.


Espe­cial­ly in Europe, the mar­ket is still high­ly frag­ment­ed in terms of secu­ri­ty token offer­ings due to the lack of reg­u­la­tions. How­ev­er, the Euro­pean Com­mis­sion adopt­ed four pro­pos­als recent­ly: the Mar­ket in Cryp­to-Assets Reg­u­la­tion (MiCA), the Pilot DLT Mar­ket Infra­struc­ture Reg­u­la­tion (PDMIR), the Dig­i­tal Oper­a­tional Resilience Reg­u­la­tion (DORA), and a direc­tive to amend exist­ing finan­cial ser­vices leg­is­la­tion which are expect­ed to take effect 12 to 24 months from now. Those pro­pos­als will allow all dif­fer­ent kinds of play­ers in the finan­cial indus­try to oper­ate with­in the EU.

How­ev­er, at the moment the spe­cif­ic applic­a­ble laws still depend on the juris­dic­tion of the issuer, res­i­den­cy of investors and what type of invest­ment con­tract is tok­enized. There­fore, a har­mo­nized Euro­pean mar­ket will bring liq­uid­i­ty to the then uni­fied ecosystem.


The pan­elists also agreed that, in addi­tion to the legal frame­work, edu­ca­tion about the ben­e­fits of tok­enized assets is anoth­er impor­tant build­ing block miss­ing to enable the ecosys­tem’s con­tin­ued growth.

Tra­di­tion­al finance activ­i­ties are still cen­tral­ized and the tok­eniza­tion ecosys­tem still lacks cred­i­bil­i­ty. Once major finan­cial play­ers also begin to acknowl­edge the secu­ri­ty and trans­paren­cy the blockchain tech­nol­o­gy behind dig­i­tal assets offers, secu­ri­ty tokens will appear much more and much faster in pri­vate and pub­lic markets.


Anoth­er chal­lenge is to ensure that tok­enized secu­ri­ties can be offered across bor­ders around the world. For­tu­nate­ly, spe­cif­ic smart con­tracts are already in fur­ther devel­op­ment to adapt to the var­i­ous reg­u­la­tions. This will allow STOs to auto­mat­i­cal­ly com­ply with the rules and reg­u­la­tions of each juris­dic­tion in which they are offered, mak­ing cross-bor­der STOs much easier.


To con­clude, tok­eniza­tion has def­i­nite­ly already start­ed but the break­through of secu­ri­ties is yet to come. The recent hype around NFTs proves that asset tok­eniza­tion is very promis­ing. How­ev­er, tok­eniz­ing secu­ri­ties is a lot more com­pli­cat­ed. The tech­nol­o­gy to help STOs step for­ward in pub­lic and pri­vate mar­kets is in place, and with ongo­ing reg­u­la­to­ry adjust­ments around this ecosys­tem, it is only a mat­ter of time before dig­i­tal secu­ri­ties become the stan­dard in the finan­cial industry.