Tokenization is the next major step in the way financial assets are accommodated and offers advantages compared to existing traditional structures, the company of Wall Street Bank of America (Bac) said in a Friday report, noting that it also presents risks.
Basically, tokenization is the process of conversing the property of real assets, stocks and obligations in real estate, investment capital and even in art in digital tokens recorded on a blockchain.
The tokenization follows a line that started with common funds (ETF)And according to bank analysts, this model could reshape the way in which investors access and manage assets by offering a number of advantages compared to traditional structures.
Among the most important advantages are improved liquidity, have written analysts led by Craig Siegenthaler, adding that trading 24/7 could open secondary markets for previously illiquid private assets, and faster friction regulations that eliminate delays of several common days on the financial markets today.
The tokenization also allows a fractional property, analysts said, reducing investment minimums and expanding access to wallets. Transparency is another advantage because blockchain books provide immutable recordings and accessible to the public of property and transactions.
Farm costs are possible by removing intermediaries, and intelligent contracts can automate key processes such as dividend payments, coupons and voting rights, while helping to navigate the regulatory requirements and even the complexities of investment capital, the report.
According to Rwa.xyz data supplier, the value of active active people represented on chain exceeds $ 28 billion.
Risks of tokenization
However, Bank of America warned that tokenization is faced with important obstacles before being able to obtain a generalized adoption.
Regulatory uncertainty remains the greatest challenge. While American decision -makers have reported support, future administrations could reverse the course and many jurisdictions are still writing rules.
The bank said that custody was another concern because investors are likely to lose access to assets if private keys are moved and that institutional quality solutions are still developing.
On the technology side, the vulnerabilities of smart contracts or blockchain platforms give way to exploitation, and integration with the inherited financial infrastructure presents additional obstacles, given the dependence of most institutions on traditional systems.
And with regard to the assets listed on the stock market, the existing American markets already offer deep liquidity, low costs and strong investors’ protections, which makes the tokenized versions less convincing, added the report.
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