The token economy

According to Deloitte, tokenization could make the financial industry more accessible, cheaper, faster, and easier, thereby possibly unlocking trillions of euros in currently illiquid assets, and vastly increasing market liquidity and depth.

These assets are only available to specialized investors; a situation that leaves extraordinarily little room for retail investors to access these markets. In other words, investors are only left with the possibility of investing in equity and/or debt markets or cryptocurrency (which carries higher volatility and risks).

Real estate is one of the leading examples of a highly illiquid market, with high barriers of entry. A solution to this problem comes in the form of asset tokenization which provides diverse investing opportunities due to reducing barriers to entry and providing liquidity to asset owners. If we consider the European commercial real estate market alone has an estimated total valuation in the region of over 6,500bn and an estimated annual investment of 15bn.

In addition to this, globally, we are seeing the early stages of mass adoption of crypto assets and cryptocurrencies generally;

• Central banks (Fed, ECB, BIS) are discussing the implementation of Central Banks of Digital Currencies (“CBDCs”).

• Retail banks adopting blockchain based solutions.

• US Treasury to allow blockchain, stablecoins for bank payments.

• Online finance and investment platforms are thriving:

• Robinhood has experienced a growth in users from 1 million in 2016 to 14 million in 2020; did a succesful IPO with a market cap today of over $40B.

• Coinbase did a successful IPO with a market cap today of over $50 billion USD.

• The crypto exchange Binance has a daily trading volume of above $500 million per day.

• US crypto exchange Coinbase successfully IPO’d this year.

Security Token Offerings and general asset tokenization is a disruptive technology since it provides a bilateral solution for retail investors and asset owners. Its adoption is well underway as a new form of financing, creating new alternative, untapped sources of return.