Beyond Bitcoin: Handel mit tokenisierten Vermögenswerten

Beyond Bitcoin – Our new monthly webinar series takes a deep look behind the scenes of the crypto and Blockchain industry and discusses business cases, opportunities, and challenges of these new technologies that go beyond Bitcoin.

In the first episode, we looked at the topic of tokenization. What is the business case for tokenization, what is the current state of play, and how should tokenized assets be regulated? All of these questions were discussed by our moderator Darko Stefanoski, Partner at EY and leader of the Digital Law team with an exciting panel, including Andy Flury (CEO of Algotrader), Mark Dambacher (CEO of Incore Bank), Andreas Glarner (Partner at law firm MME) and Manuel Müller, who is Head of Sales at Amazing Blocks.

Tokenization is on everyone’s lips, and there is little doubt that it is an important topic that will only gain relevance in the future.

There are many initiatives already underway both in Switzerland and beyond. In Switzerland, for example, the exchange operator SIX has launched the digital exchange SDX. There are also companies like Taurus and Sygnum that offer their own platforms for tokenized assets. From a global perspective, crypto exchanges such as FDX and Binance are also active in the field.

In general, two types of assets can be tokenized.

First, existing assets, such as bonds and shares can be tokenized. This represents the end goal. The question is whether there is any value-add in tokenizing existing securities. One possible added value are fractional shares, i.e. shares in a single stock.

On the other hand, there is the possibility to tokenize assets that are not tradable yet. This includes real estate, art, or digital assets.

Currently, the more considerable demand tends to be in non-bankable assets. Today, most tokenization projects are focused on real estate and art assets. This comes as little surprise. After all, a well-functioning infrastructure already exists for bankable assets. Therefore, it is unlikely that existing traditional securities will be tokenized soon.

In non-tradable assets, however, the tokenization wave is coming with great speed and will only take a few more years until non-liquid assets become tradable.

This requires functioning secondary markets. But here, there is a classic marketplace problem: too few assets and not enough marketplaces exist today. There needs to be a liquid secondary market for tokenized marketplaces to grow. The so-called killer case for tokenization does not yet exist.

The webinar also addresses what interest existing banks have in offering such tokenized assets and marketplaces. After all, most banks are currently more focussed on providing crypto trading and custody, i.e. how to provide customers with access to Bitcoin and Ethereum trading in their current e-banking infrastructure. This is a good exercise for the future. The technology for tokenization is the same as for crypto trading.

The banks need three components:

  • They need a custody solution for securely depositing crypto assets. There are various providers in Switzerland and internationally offering this.

  • Then they need a trading platform that can be integrated into the existing platform.

  • Finally, they need an orchestration layer. A component that connects all the layers and automates most tasks.

These technologies already exist and could theoretically be implemented.

The topic of regulation was also discussed several times during the webinar.

Regulation is necessary. Because only regulation leads to increased adoption, especially by institutional customers. When it comes to tokenized assets, there are different concepts of rights in the law, which depend on the type of assets that need to be regulated.

There are absolute rights – these are tokens that represent full ownership rights. For example, the holder of a real estate token may own a property.

Then there are relative rights – these are tokens representing a right to a claim. For example, in the case of share tokens, these are the right to claim dividend payments.

Then there are digital asset rights, which are rights to digital goods such as digital real estate. This concept of rights doesn’t even exist yet. The current concept of ownership presupposes physical assets.

But for tokenization to gain adoption, all three of these rights need to be clarified. In addition, regulated trading venues are required.

In summary, tokenization is here to stay. Interest is growing strongly, and new business cases are emerging almost daily. There are still some non-technical challenges that need to be solved. But in the next few years, there will be many currently non-traded assets that can be traded in this way.

Mark Dambacher
CEO InCore Bank

Andreas Glarner
Partner MME

Andy Flury
CEO Algotrader

Manuel Müller
Head of Sales Amazing Blocks

Darko Stefanoski
Partner EY