Institutional Tokenization 3.0: Break Silos
October 2024 Institutional Tokenization 3.0: Break Silos Since Tokeny started building tokenization solutions in 2017, we have seen financial institutions exploring tokenization of assets in…
A Journey Through the Evolution of Blockchain for FIs
October is a memorable month for us as we commemorate Tokeny’s 6th anniversary in 2023.
Reflecting on our journey, the transformative strides in blockchain and its emerging prominence in the financial sector stand out.
? The Early Days (2017-2020): The Need for a Suitable Blockchain
In the fledgling stages of our journey and the evolution of security tokens, many early adopters in the financial system believed that the best solution was to craft their own blockchains. This mindset stemmed from a desire for control instead of utilizing a public blockchain. Given the uncertainty about ensuring compliance on permissionless networks, many chose to develop their own blockchains, adopt private ones, or work within siloed ecosystems.
As time progressed, public networks significantly improved in speed, cost, interoperability, as well as compliance enforcement via smart contracts. The realization grew that the answer wasn’t necessarily about creating a new blockchain. Instead, it became evident that the future would hinge on bridging the sense of compliance on a public ledger.
? The Buzz Period (2020-2022): The Age of Wallet Solutions
The next phase in this evolution was characterized by a realization that blockchain could be a suitable infrastructure for global finance, but then came the next hurdle in solving the custodianship problem. As a reminder, securities are bound by numerous regulatory guidelines for various asset servicers. Implementing these on-chain necessitates creative solutions that comply with the law.
This period witnessed a growing understanding that cryptocurrencies and security tokens don’t function identically. With regulations becoming stronger for custodial wallets, a pressing demand for non-custodial wallets became evident. This shift was indeed a welcome one, aligning with the core essence of blockchain, where end-users should inherently control their assets, manage their accounts, and identities. Moreover, protocols like ERC6343 guarantee the possible recovery of tokens via smart contracts.
? The Scaling Phase (2023-∞): Tokenization in Action
Fast forward to today, after years of exploration and discovery, the time has come to fully harness the power of this technology. Business is now reclaiming the reins from tech departments with a new mantra – “We need tokenization capabilities.” Financial Institutions (FIs) are increasingly eager to design new blockchain-based services for their clientele for a variety of use-cases including but not limited to: treasury management, collateral management, cap table management, alternative liquidity options, and many more.
As time to market becomes increasingly important, to ensure unity and to accelerate adoption we encourage the use of open-source standards like ERC3643, so everyone can interact on the same nomenclature and functioning principles. From investors to issuers, to custodians, to exchanges, to asset servicers, leveraging the same framework is massively beneficial.
In alignment with this vision, Tokeny and 35+ distinguished members across industries have established the non-profit ERC3643 association. Our primary aim is to globalize this standard and expedite its adoption.
We cordially invite FIs aiming to pioneer this transformation to join our collective efforts.
Cheers to Tokeny’s upcoming years and the continued positive trajectory of blockchain!
We appreciate your time, here’s to the next 6 years! ?
