Guidelines for enabling tokenization success
While we have simplified tokenization here, there are several complexities to think about when building out your own project, including ecosystem considerations and scale, operational considerations, product design and portfolio management considerations. Five guidelines can help you find your path forward.
- Find what’s feasible — and valuable. Identify and map realistic opportunities to simultaneously deliver short-term value — often by strengthening your core business — and expand long-term capabilities. It’s usually preferred to focus less on isolated use cases and more on capabilities. When well implemented, the same foundational capabilities often require only bespoke additions to support many different, valuable use cases.
- Assess the challenges. Once you’ve identified the capabilities you need, prepare for the challenges: technology, skills, culture, security, risk management and more. Be sure to consider the need for interoperability — the ability to move tokenized assets across separate networks or tech stacks.
- Understand your stakeholders. Whether your initiative has only internal stakeholders or involves counterparties, clients or investors, map out how tokenization can provide value and grow their trust.
- Design trust in. An effective way to enable trust is to put it front and center, starting at the design stage. Embed oversight capabilities into your organization, create or enhance controls for digital assets, upskill risk professionals, and be ready to comply with regulatory, legal and tax requirements.
- Learn from others. Bitcoin just turned 15 years old. In traditional finance (TradFi) that may be young in terms of a currency, but in the field of innovation, it isn’t. There are people with deep experience in the nuances of tokenization technologies and their implementation. For both initial and more complex tokenization initiatives, consider allying with digital natives or other trusted organizations that have a deep history with and rich understanding of digital assets and tokenization.
Once you have one tokenization initiative at work and delivering ROI it becomes easier to implement others quickly. As tokenization becomes more integrated into your technology stack and business processes, more and more net-new uses will likely become evident. Soon, you may find that tokenization has enabled a new paradigm and become a trusted foundation for near-instant, transparent and hyper-personalized financial services, coupled with speedy, low-cost settlement and increased liquidity across a broad range of assets.
1 Jodi Xu Klein, “The $1.5 Trillion Private-Credit Market Faces Challenges,” The Wall Street Journal, October 16, 2023, accessed via Factiva, February 6, 2024.
2 Aruni Soni, Treasury-yield surge boosts tokenization of real-world assets on blockchains, leading ‘huge paradigm shift’ in finance, Business Insider, November 12, 2023, accessed via Factiva, January 25, 2024.
3 Luisa Crawford, “Global Supply Chain Financing: A New Era of Resilience and Diversification,” Blockchain News, January 24, 2024, accessed via Factiva, January 25, 2024.
4 Miriam Cross, “Large regional banks invest in startup deposit network,” American Banker, January 23, 2024, accessed via Factiva, January 25, 2024.
