Tokenization offers flexibility to create value from almost every conceivable product. Security tokens have long been online in the blockchain and DLT sectors. The potential to attract new investors, especially institutional companies, the cryptocurrency sector and the use of these technologies, is undeniable.
The concept of tokenization became popular on the network Ethereum BUY NOW in the crypto realm. Over time, various industries have recognized the potential to label almost any product. There are no limits to the imagination and there are already companies that have merged from real estate, stocks and even wine.
The process would be to convert a concept or product into a token using blockchain or DLT (Distributed Ledger Technology). By transforming this product into a digital and global entity, a new financing option that did not previously existAll thanks to technology.
On this occasion, GBA Madrid was able to conduct an interview with Jonathan Garcia, Who works in a manager related to BBVA in the industry of Securitization (Title in English) of assets.
What are the famous securities?
The ssafety It becomes a magic word like blockchain. For this reason, it is important to understand what exactly it is and how it can be compared to tokenization. According to García, it is:
“Take small and therefore non-liquid products and present them in a” physical “product with a negotiable value that is unnecessary with a monetary value.”
The tokenization label is known among the participants of the cryptocurrency market, but it already exists on the financial market, it is the so-called securitization.
The only The goal of the degree is funding. A clear example would be the securities of the mortgage loans used by banks. There are thousands of types of mortgage and with different terms. The idea is to combine them into a single financial product with the same amount and functionality. This means that its marketing is fungible and can therefore be brought onto the market.
As García commented, banks use this method to achieve profitability from the money deposited into their accounts in a variety of conditions, thereby paying the guaranteed interest to their customers, for example to make extra money.
This is just an example, but theoretically almost any product could be titled, hence its potential.
Title and tokenization risks
Juan Pablo Mejía, director of GBA in Madrid, asked him about the case of Freddie Mac, one of the leaders in the 2008 crisis. García explained that the crisis came from derivatives that are deals from other deals, which was very complicated the compression of the financial product. Europe has not suffered from the fact that such products have not been regulated, but the US is very creative and has the consequences for it. These issues are obviously much more regulated today.
The complexity of these products leads to a very hot topic in both the traditional and cryptocurrency markets. Education is still a major obstacle and, as García commented, it will lead to the failure to understand these products Only institutional investors can investdue to the associated risks.
Advantages and challenges of tokenization with DLT technology
One of the greatest advantages of using DLT technology to tokenize products would be their use A single account book that is unique, immutable, secure, global and potentially decentralized.
García explained that the registration process involves many steps in which the data has to be stored in different databases and an additional copy has to be made in a security secondary market. To If you use DLT, the sector would simplify the registration process and it would also gain security and transparency.
The DLT world is still small, but if an institutional or large company refuses to use this technology, it would trigger a boom in the industry and could also create a trend. Yes, García remarked:
“Everything that has been discussed so far is utopian because the main choice is regulation.”
Each state has its own rules and it is very difficult to unify them. The Internet of Value is attractive, so everyone worldwide can access this unique record book. This would require global regulation. All products would have to be labeled according to the regulations of each country, thereby subtracting them from their initial value.
Until there is global regulation, this technology would be useless, one of the The big challenge of decentralized technology is global reality, which is not uniform.
The volatility of cryptocurrencies is an enemy of security
The ideal situation for tokenization is that cryptocurrencies are used for this future Securities. Their decentralized character and the use of similar technologies make them perfect candidates.
García pointed out that a detail that prevents the use of cryptocurrencies in a hypothetical traditional market tokenization would be the current volatility in the crypto market. This would be a clear barrier because it removes the lightness required for these products.
The crypto market is still young and therefore still has to find a stable price range. The technology is already there and its advantages are obvious, however without a real use case, they will be forgotten if these challenges are not met.
The potential is immense, so several companies, governments and key players will be looking for their piece of cake. This move will certainly make tokenization a reality.
You can find the full interview here:
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