The Global Shift Towards Tokenization — How Singapore and Others Are Taking The Lead
Tokenization is probably the biggest digital asset innovation that most world institutions seem head-over-heels.
All over the world, countries have been coming up with regulations for tokenized securities, and big partnerships further strengthen the vision for tokenization that TokenFI so upholds.
The Monetary Authority of Singapore (MAS) recently introduced new measures to advance the commercialization of tokenized assets. Under these measures, MAS aims to form commercial networks to build further liquidity in tokenized assets. The authority is also working to develop an ecosystem of market infrastructures and set up industry frameworks for implementation and settlement facilities for tokenized assets.
Leong Sing Chiong, MAS’s deputy managing director (Markets and Development), said, “MAS has seen strong interest in asset tokenization in recent years, notably in fixed income, FX, and asset management. We are encouraged by the keen participation from financial institutions and fellow policymakers to co-create industry standards and risk management frameworks to facilitate commercial deployment of tokenized capital markets products and scale tokenized markets on an industry-wide basis.”
Singapore’s Project Guardian, a collaborative initiative for digital assets by various institutions, has become a flagship program in the space.
Project Guardian’s crypto industry group published two frameworks on accepting and implementing tokenized assets by financial institutions. Around 40 financial institutions, industry associations, and international policymakers are under Project Guardian today.
The Monetary Authority of Singapore (MAS) has also actively promoted tokenized securities through its FinTech Regulatory Sandbox. Though Singapore was the first and foremost to arrive on the tokenization front, it is not the only one. Let’s discuss a few more countries and their approaches and enthusiasm towards tokenization.
Switzerland
Switzerland is another frontrunner in the tokenization space, with a comprehensive legal framework and an entire Blockchain Act covering tokenized securities. Real estate has recently been one of the largest sectors impacted by tokenization. Also, one-half of the banks in Switzerland are planning tokenization initiatives.
Switzerland’s Financial Market Supervisory Authority (FINMA) is also favorable to tokenized securities and has laid clear guidelines for issuing and trading tokenized securities.
United Arab Emirates (UAE)
Since its beginning, the UAE has embraced blockchain and tokenization and has taken several steps to promote digital assets. The Dubai Financial Services Authority (DFSA) released a framework for digital assets, and its progressive policies have positioned the UAE as a leader in blockchain innovation in the Middle East.
A subsidiary of UAE’s second-largest bank, Liv Digital Bank, has partnered with real-world asset (RWA) tokenization firm Ctrl Alt to tokenize private equity, private debt, real estate, and infrastructure. In another development, MANTRA Chain is all set to tokenize $500 million worth of real estate for a Dubai-based firm.
Standard Chartered also recently launched a digital asset custody service in the UAE. This is a significant step in the bank’s expansion into the digital asset sector. The UAE also recently approved salary payments in crypto and furthered the regulations regarding crypto and other digital assets.
United States
The United States hasn’t been very enthusiastic about cryptocurrencies and tokenized assets overall, but a few states are impacting the space. Wyoming, for instance, has passed a legal framework for digital assets and tokenized securities.
The treasury bill market is one of the largest tokenized markets, with an AUM of $2.4 billion on public blockchains alone. The US Department of Treasury recently published a report on tokenized treasury bills. State-level experimentation might gradually lead to a nationwide framework in the future.
European Union
The European Union recently released one of the most comprehensive cryptocurrency frameworks: Markets in Crypto-Assets (MiCA) regulation. The framework includes regulations on tokenized securities.
The framework doesn’t specifically focus on RWA tokenization, but recent developments in the RWA space mark the beginning of a new chapter in the EU. For instance, Slovenia recently issued the first digital bond in the EU, and the European Central Bank (ECB) shared its vision of tokenized securities.
Japan
Japan is probably the most active country in the digital assets space. Its Financial Services Agency (FSA) has been actively developing regulations involving the adoption of blockchain technology and tokenized securities.
SBI Digital Markets has reinforced its role in Singapore’s Project Guardian, which has new pilots to advance tokenized securities in other countries and global markets. The SBI group subsidiary is also developing a cross-border framework for tokenized assets and regulated asset exchanges.
Japan also amended the Financial Instruments and Exchange Act and included security tokens. BOOSTRY released Japan’s Token Market Report which said: Market saw a rapid increase in issuance value and a diversification of products and the financial institutions handling them, confirming that the market has moved from the proof of concept stage to practical use. This also shows that security tokens have been established as a new financing method in the capital markets.’
Japan is also attracting global interest from institutions such as Franklin Templeton. FT set up a joint venture with SBI Holdings to advance digital asset management and broaden investment opportunities for Japanese investors.
Hong Kong
Hong Kong’s Securities and Futures Commission (SFC) has also developed a Comprehensive Framework and issued guidelines for STOs (Security Token Offerings). The country remains committed to promoting the cause of digital assets and promoting itself as a hub for digital finance.
It recently kickstarted its tokenization sandbox, Ensemble, with major institutional players like HSBC, Hashkey Group, etc. The sandbox will aim to test “interbank settlement using experimental tokenized money, focusing on transactions involving tokenized assets.”
The Road Ahead
There is no denying the fact that RWA tokenization is gaining acceptance and relevance globally, and more and more countries are coming forward to experiment and embrace the innovation. We just touched the tip of the iceberg with these handful of names. Countries are exploring various ways to integrate tokenization and integrate it in their regulatory framework for a tethered succession to the digital.
Today, tokenization is being used to digitize financing, fulfill environmental causes, fractionalize real estate, and track supply chains all over the globe. It is no longer the futuristic vision that Larry Fink talked about in early 2024. While challenges remain, we will see more projects and institutions innovating in space and government bodies developing regulations for investor protection and financial stability in the markets. As for us, we have been right here since the start.
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