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.
- Christian Platzer (Co-Founder & Managing Partner, Black Manta Capital Partners)
- Richard Teng (Chief Executive Officer, ADGM)
- Graham Rodford (Chief Executive Officer, Archax)
- Mahesh Harilela (Chief Executive Officer, LABS Group)
- Martin Kreitmair (Chief Executive Officer, Tangany)
- Luc Falempin (Chief Executive Officer, Tokeny)