Banks are struggling to ‘tokenise’ assets
AMSTERDAM: Banks for years have talked about creating “tokenised” versions of assets such as bonds and currencies. But they say a shift to blockchain-based trading is taking longer than expected, while some investors are cautious about the idea.
By creating tokenised assets — usually blockchain-based tokens to represent holdings of mainstream assets such as currencies or bonds — banks hope to make it more efficient, faster and cheaper to trade, and easier to record who owns want.
Consultants and digital asset executives predict that a significant proportion of the world’s assets will be tokenised via blockchain — HSBC and Northern Trust said last year they expected 5% to 10% of all assets by 2030.
But executives speaking at the Money20/20 fintech conference last week said the shift to digital versions of assets was moving slowly.
“It’s taken longer than I expected, to be honest, to get to the point where we are in this space,” Ryan Rugg, head of digital assets for Citibank’s trade and treasury solutions business told the Amsterdam event.
“We’ve experimented with money markets and bonds but nothing that’s live and scaling right now, the only application that we have live is a tokenised deposit.”
Despite this, Rugg said she remained enthusiastic about tokenisation with the aim to create a tokenised deposit that can be sent 24/7, 365 days a year, avoiding cut-offs in different time zones or for banking holidays.
Clients are requesting it and the token has been live since last year, Rugg added.
While there have been various experimental projects — for example, to create blockchain-based bonds — tokenised trading lacks a liquid secondary market.
Having spent seven years attempting to rebuild its software platform around blockchain, Australia’s stock exchange eventually “paused” the project and announced last year that the upgrade would no longer involve the technology.
One of the main impediments to trading traditional assets via blockchain is that banks are working on their own networks, making it difficult to trade across platforms.
“Fragmentation slows adoption, as investors don’t want to connect to dozens of different networks,” said Julien Clausse of the BNP Paribas digital platform AssetFoundry.