When someone talks about tokenization, the immediate thought is creating tokens, but the concept goes beyond simple creation of digital assets. It is a profound transformation in the way assets are represented and traded, opening new possibilities for liquidity and accessibility in the financial market. Thus, creating tokens is just the simplest product of tokenization, as the entire transformation it promotes comes long before and is much more important than the digital asset itself.
Tokenization, essentially, is the representation and conversion of rights over an asset into a digital token on the blockchain. These tokens can represent any asset, from real estate, credit with collateral like securities, equity, and commodities. The great innovation of tokenization lies in its ability to decentralize supply and bring liquidity in ways that were not possible before without the involvement of traditional financial institutions such as banks and brokerage firms.
While some market players see tokenization as a way to provide liquidity by decentralizing supply or even taking advantage of the opportunity to serve banks, others see the opportunity to play new roles in the market. An example of this is an office of autonomous agents that aspires to be a brokerage or a structurer. Traditionally, becoming a brokerage is a costly and exhaustive process, involving high hiring, risk and operational analysis, as well as heavy taxes. And becoming a structurer brings with it a responsibility previously only taken on by those with the know-how.
With tokenization infrastructure, these offices can become token issuers, acting similarly and fully, but in a much simpler and more economical way. This eliminates the need to become traditional brokers, allowing them to sit at the table with the taker and offer investment products and financial services directly.
Tokenization infrastructure allows market agents to perform functions that were previously out of reach due to regulatory and cost barriers. By becoming token issuers, they can create an environment where asset trading becomes more accessible and scalable. This process involves paving the way for management, and the token simply serves as a transaction vehicle, replacing or complementing traditional methods of financing and investment.
Thus, tokenization does for autonomous agents what Bank as a Service (BaaS) did for fintechs and small to medium-sized companies: creating a range of opportunities for them to leverage their base, expand their services and businesses in a simple, fast, cheap, and secure manner with a robust technological infrastructure ready to scale.
Tokenization attracts new actors to the market, providing autonomy and decentralization. Companies that used to only consume the financial products they produced can now become active participants in the issuance and offering of these products. This creates a more dynamic and competitive ecosystem, where innovation is encouraged, and entry barriers are reduced.
For example, a company that previously relied on brokers to distribute its credit products can now use tokens to offer them directly to the market. This not only reduces costs but also increases the efficiency and transparency of transactions. Tokenization allows these companies to become market structurers, creating and managing their own financial products with greater control and flexibility.
Tokenization and liquidity
While liquidity is one of the main promises of tokenization, it is not the only benefit. The ability to decentralize the supply of assets and democratize access to investments is equally important. Tokens can be easily traded on digital platforms, increasing the liquidity of assets that were previously difficult to transact.
Furthermore, tokenization offers an operational solution even before bringing liquidity. Tokens can be used to manage assets, track ownership, and execute contracts in an automated manner, reducing the need for intermediaries and increasing operational efficiency.
Tokenization is changing the financial landscape by allowing new players to enter the market and occupy previously inaccessible positions. As more players adopt this technology, we will see a continuous transformation and an increase in opportunities for all market participants.
