Blockchain technology is massively transforming the financial services industry. One of the recent blockchain-based innovations is asset tokenization. Thanks to the transparency, cost-effectiveness and accessibility it offers, tokenization can trigger the creation of a whole new financial trading system. While the full potential impact is yet to be understood, a study by Roland Berger & Keyrock focusing on the impact of tokenization on stock trading shows that post-trade stock tokenization will result in gains of EUR 4.6 billion by 2030 could lead. The analysis shows that tokenization has the potential to create new opportunities across the financial services spectrum, demonstrating that now is the time to act.

What is tokenization

Tokenization is the process of converting shares or assets into a digital token that can then be used, owned and transferred by the holder via a blockchain without the need for a third party intermediary. Roland Berger & Keyrock’s study focuses specifically on investment tokens, which can provide their holder with the same voting rights, rights to future cash flows, etc. as traditional stocks or bonds, but in a digitized form so that ownership of these assets is retained.

By eliminating third-party intermediaries traditionally involved in the post-trade process, tokenization offers significant cost-efficiency benefits. In addition, seamless data flow allows for greater transparency. Tokenization also creates new opportunities as asset fractionation drives access to new markets.

However, tokenization is not without its challenges. There are significant hurdles that need to be addressed from investors to issuers:

• Regulatory Framework: Without common industry standards or homogeneous regulatory frameworks, the adoption of tokenization, essentially a model that operates to a common global standard, becomes problematic.
• Scalability: Permission and encryption times in the different blocks of the chain take a long time, making scalability a major bottleneck that needs to be further addressed.
• Cyber ​​Security: Several factors, including the combination of centralized and decentralized environments, make establishing adequate cybersecurity measures a challenge.
• Adoption: Tokenization is still in its early stages and is expected to take some time to catch on; It would require persuasion by many retail investors and significant investment in the new technology.

However, tokenization has the potential to reduce the complexity and inefficiency of the current post-trade process. For example, blockchain’s secure linking of financial institutions and merchants could potentially eliminate the need for the clearing process and significantly reduce settlement times.

The example of stock trading clearly shows that tokenization is not only permanent, but can have a major impact across the financial spectrum, leading to irreversible changes.