Statement: The use of tokenization empowers investors and causes disruption in Wall Street.

The Times They Are-A Changin”—this classic opening line from one of Bob Dylan’s most endearing songs has become the most appropriate statement when discussing contemporary asset-holding patterns.

According to a comprehensive market study from Ernst&Young (E&Y) conducted last year, there has been a notable rise in the allocation of funds towards digital assets and a growing interest in tokenization. The report also revealed that institutional investors are becoming more optimistic about the future value of blockchain and digital assets. The E&Y survey found that 57% of institutional investors are considering investing in tokenized assets, while 93% believe in the long-term potential of blockchain and digital technology.

Surprisingly, it was not just their desire to tokenize assets that stood out, but also their well-defined plan of action. To illustrate, 71% of the institutional asset managers examined had plans to tokenize their assets through collaborations with digital or tokenization companies. Additionally, 21% aimed to develop their own infrastructure, while 5% intended to purchase a tokenization startup.

Tokenization is a powerful tool that can empower individuals or groups.

In one of their explanations, McKinsey & Company describes tokenization as creating a digital, one-of-a-kind, and unidentified representation of a tangible item. In order to carry out this process, a blockchain is necessary. Institutional investors tend to prefer public-permissioned blockchains for tokenizing their assets, with 40% preferring private chains and 22% preferring public chains.

One of the most enticing aspects of tokenization is its inclusivity, allowing for a wide array of assets to be tokenized. These include real estate, art, bonds and equities, intellectual properties, and even identity and data.

Numerous instances exist where tangible assets have been converted into tokens, thus broadening the potential access to these assets for a wider range of clients and investors. One notable example is Gold, which has a long-standing reputation as a dependable asset in civilizations throughout time. In the previous year, the collective market value of tokenized gold assets exceeded $1 billion.

Tokenized gold involves the physical gold bullion whose ownership rights are stored as digital tokens on a blockchain. While the physical gold remains in secure custody off-chain, protected by financial institutions, those who offer tokenized gold mint digital tokens on a blockchain to signify ownership rights of physical gold bullion or coins. The equivalency—such as one on-chain token representing one gram of physical gold stored off-chain—is determined by the issuing company.

Several companies currently provide tokenized gold coins, such as Paxos Trust Company in New York, offering PAX gold (PAXG) coins, and Tether, a prominent blockchain organization, providing Tether gold (XAUT).

Similar to gold, art is a type of asset that has been heavily adopting tokenization. An upcoming blockchain platform called Freeport announced in April 2023 that it had passed its SEC review and would be launching a tokenized art platform that includes four famous Warhol artworks from well-known collectors like Baby Jane Holzer.

lack of regulation and the involvement of intermediaries and gatekeepers can limit these opportunities.”

Blockchain has made it possible for the average retail investor, particularly the younger generation, to access exclusive investment opportunities that were previously unavailable. Yet, when it comes to fine art, the absence of regulation and the presence of intermediaries and gatekeepers can restrict these possibilities.