Big Banks Are Entering Into The World Of Tokenization — An Approach Long Advocated by TokenFi

5 min readMar 18, 2024

The world of finance is changing as big banks start using new tech, like blockchain, to make things run smoother and open up new possibilities.

Citibank is making waves by using the Avalanche blockchain to turn ownership in private investment funds into digital tokens.

This step not only pushes the banking industry forward but also puts the spotlight on TokenFi’s vision to change assets from the real world, like houses or art, into digital pieces that can be traded and owned by anyone, even in small amounts.

Understanding Tokenization and Its Impact

To grasp the magnitude of Citibank’s venture into blockchain, one must first comprehend what tokenization entails.

Simply put, tokenization is the process of converting rights to an asset into a digital token on a blockchain. That means the big thing you owned is now a bunch of digital tokens. With Citibank’s test, they’re doing this with private equity funds which are investments in companies that aren’t on the stock market.

What’s great about tokenization is that it opens up the chance for more people to invest in things — stuff that often only rich people or big-time investors could get into before. By breaking down ownership into bits and pieces that are digital, more people can get in on the action, it can be easier to sell your share, and it might even cost less to buy or sell these digital bits.

Big Banks Say Yes to Blockchain

When old-school financial firms, the ones that have been around for a long time, start to use something like Spruce, it’s a big deal.

Companies like T. Rowe Price and others are taking serious steps into this space, trying to see how blockchain can make buying, selling, and trading smoother.

Big banks are jumping on blockchain. They’re using it to “tokenize” assets.

Tokenization is offering the prospect of improved transaction efficiency and the overhaul of markets that are typically hard to liquefy. Over the last five years, financial entities have been investigating the application of blockchain technology to bring tokenization to a grand scale effectively. It’s now uncommon to find notable first and second-tier banks without some involvement in digital assets or blockchain initiatives. A growing number of these institutions are seriously examining the possibilities of converting tangible assets into digital tokens.

In early 2023, ABN Amro, a bank in the Netherlands, made waves by creating a special bond worth €450k using a blockchain system called Stellar. Other big banks like Goldman Sachs and Santander also helped out with a massive €100M bond. J.P. Morgan dove in too, using tokenization to shuffle money between different currencies.

Experts at Boston Consulting Group, are saying that by 2030 all kinds of things we don’t normally trade easily, like buildings or oil, might be worth a whopping $16.1 trillion as tokens.

Four Big Benefits of Tokenization For Banks

1. Quick and Smooth Deals: Normal trades can be slow because of all the back-and-forth checks. But with tokenization, you can trade almost instantly because all the info and rules are part of the token. Siemens, for example, issued a bond quickly using tokens on the Polygon blockchain.

2. Everything Runs on Autopilot: Tokenization means lots of routine tasks can run themselves. So, things like doing the math on payments or making sure rules are followed can happen automatically. Hong Kong’s government used this trick for green bonds with Goldman Sachs’ help.

3. Small Slices for Everyone: Usually, only rich people can invest in things like big buildings or new companies. Tokenization cuts these big investments into lots of little pieces so more people can buy in. For example, in April 2023, a bunch of people managed to own a part of tokenized gold, and it hit a market cap of over $1 billion.

4. A Clear Picture of Transactions: Blockchain keeps an exact record of every trade. This makes things clearer for banks and businesses because they can see everything in one place. No need for big, complicated systems to track transactions anymore.

By adopting tokenization, banks can streamline their services, offering their customers a smoother experience. The old ways included lots of paperwork and waiting periods, often resulting in frustrated customers and a high cost of doing business.

Banking Without Borders

Now, turn your eyes toward a contemporary banking landscape — an arena without the usual geographical restraints. Banking Without Borders: The Global Reach of Tokenization

Tokenization doesn’t only streamline transactions, it redefines strategic market expansion for banks. Financial institutions can now aspire to serve customers from any corner of the globe. For example, a local bank in Switzerland could issue a digital token representing a share in a real estate project, allowing investors from Asia, North America, or Africa to participate alongside European investors with unprecedented ease.

Moreover, tokenization isn’t limited to real estate. It encompasses a spectrum of assets, from fine art to precious metals, even including intellectual property or commodities like wine or coffee. A vineyard in France, for instance, might tokenize its upcoming harvest, offering international buyers the chance to invest in production and share in profit from the future wine sales.

For banks, these advancements mean they can attract international clients seeking diversified investment options beyond their domestic offerings. A Brazilian bank can create tokens for a local infrastructure fund and offer them to a wider investor base, using blockchain’s secure, transparent ledger to manage transactions and ownership records.

A New Money World is Coming

Citibank’s test and TokenFi doing its thing means we’re stepping into a new kind of money world. Experts think this could be a really big deal in terms of dollars — like trillions big.

This whole situation is about making the world of money and ownership fairer and open to more people. It’s about changing things so that more folks can invest in all sorts of things without needing a lot of money to start.

The important part isn’t if this token world will become usual — it’s more about when. And with big banks getting involved, it looks like “when” could be pretty soon.

A Seamless Asset Tokenization Experience

While Citibank’s experiment is relatively nascent, TokenFi has already positioned itself as an early adopter and leading innovator in the tokenization space. TokenFi’s philosophy and operations revolve around converting Real-World Assets (RWA) into tradable digital tokens, affording partial ownership and liquidity in assets that might otherwise be illiquid or inaccessible.

The significance of TokenFi extends beyond just asset tokenization; it represents a user-centric platform that bridges the gap between complex technology and everyday investors. With $TOKEN, TokenFi’s proprietary mechanism, anyone can tokenize assets easily, without requiring technical expertise or extensive blockchain knowledge.

About TokenFi

TokenFi is an innovative platform for crypto and asset tokenization, enabling users to launch or tokenize assets effortlessly. TokenFi is committed to revolutionizing the trillion-dollar tokenization industry by offering a user-friendly interface that requires no coding expertise.

Website: https://tokenfi.com

Twitter: https://twitter.com/tokenfi