Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Inside OMFIF’s Tokenisation Report: New Rails of Finance
Report | Tokenisation | Jul 4, 2024
Image: OMFIF Tokenisation The New Rails of Finance, Cover
9 Insightful Quotes from the OMFIF Report on the Future of Finance
OMFIF's "Tokenisation, New Rails of Finance" report takes a comprehensive look at how tokenisation and blockchain technology are poised to disrupt the financial industry. Here, we highlight 9 key statements from the report and their significance to provide insight into the future of finance. #blockchain #digitalmoney #stablecoins #smartcontracts
1. Stablecoins as Financial Enablers
"Stablecoins, as blockchain-native representations of government obligations, equip traditional fiat currencies with internet advantages." - Lewis McLellan, Editor of the Digital Monetary Institute at OMFIF.
Importance:
By providing a link between blockchain technology and conventional fiat currencies, stablecoins facilitate easier and more convenient transactions in the digital economy. Stablecoins provide a new means for people to transact on blockchain platforms, and fintechs view them as an alternative to conventional banking products. To remain relevant in the market, financial institutions may need to build their own digital currencies or modify their offerings to compete with stablecoins.
Further Reading: Tokenizing Assets and Unlocking Value on the Blockchain
2. Programmability of Stablecoins
"The programmability of stablecoins could make them a natural fit for creating a new, interoperable technology layer that works in the background." - Paul Green, Chief Technology Officer at IBM.
Importance:
Stablecoins with programmable features can automate complex financial transactions and connections, rendering them an adaptable instrument within the financial infrastructure. Fintech companies can create novel solutions by utilizing smart contracts and programmable stablecoins to automate financial procedures. Programmable stablecoins can be used by financial organizations to improve interoperability and streamline operations with other financial technology.
Further Reading: Swift’s Blockchain Breakthrough Boosts Global Tokenization
3. Economic Activity on Blockchain
"The World Economic Forum, Citigroup and Boston Consulting Group estimate that trillions of dollars’ worth of economic activity will take place on the blockchain in the coming years." - David Anderson, Strategic Positioning and Global Thought Leadership at Circle.
Importance:
The substantial amount of business activity that is anticipated to take place on blockchains highlights how revolutionary this technology can be for a variety of financial transactions. Fintechs can benefit from the increasing uptake of blockchain technology by creating next gen financial services and products that make use of tokenisation. Financial institutions need to invest in technology and expertise to enable the change to blockchain-based economic activity and stay competitive. This is a major transformation that they should be ready for.
Further Reading: Citi Report: Blockchain’s Next Billion Users: Money, Tokens, Games
4. Broader Tokenised Assets
"Beyond tokenised cash, other types of tokenised assets are also poised to scale significantly." - Linda Thompson, Digital Currency Expert at the Federal Reserve.
Importance:
The fact that additional tokenised assets can be scaled suggests that tokenisation's advantages go beyond stablecoins to encompass a range of asset classes. Tokenisation for a range of digital assets opens up new avenues for investment and financial engineering. Financial institutions are building infrastructure in order to facilitate the maintenance and trading of various tokenised assets today.
Further Reading: Real World Implementation of Real Estate Tokenization
5. Driving Financial Inclusion
"The potential for tokenised assets to drive financial inclusion and move global finance forward is significant." - Rachel Lee, Director of Fintech at Deloitte.
Importance:
By democratizing access to financial services, tokenised assets will foster more participation from from underrepresented sectors in the global economy. Tokenisation is a tool that fintechs can use to provide financial services to underprivileged communities, thus encouraging greater financial inclusion.
Further Reading: JPMorgan Announces First Transaction on TCN Network
6. Need for Regulation
"Central banks need to set strict prudential rules around the composition and auditing of the reserves backing stablecoins." - Financial Analyst at Citigroup.
Importance:
Stablecoins must be properly regulated in order to guarantee their dependability and safety as well as to stop their abuse for illegal purposes. Strict regulatory requirements must be followed by fintechs issuing stablecoins in order to reduce risks and guarantee adherence to financial laws. To avoid abuse and guarantee financial stability, financial institutions and authorities must set up thorough systems for tracking and managing stablecoin transactions.
Further Reading: Insights from the Tokenization Report Act of 2024 Hearing
7. Enhancing Transaction Efficiency
"Tokenising commercial bank deposits can enhance the efficiency and security of financial transactions, reducing costs and increasing transparency." - Mark Wilson, Head of Digital Assets at HSBC.
Importance:
Tokenising central bank funds and commercial bank deposits can improve the security and efficiency of financial transactions while lowering costs and boosting transparency. Fintechs can create systems that enable tokenised commercial bank deposits, enabling consumers to transact on the blockchain easier than today. To meet customer demand for blockchain-based transactions and technological improvements, central and commercial banks may need to step up their tokenisation activities and services.
Further Reading: JPMorgan Announces First Transaction on TCN Network
8. Importance of Interoperability
"Interoperability is hard to deliver – but absolutely essential for the future of blockchain technology." - Olivia Brown, Lead Blockchain Engineer at Microsoft.
Importance:
The smooth operation of several blockchain networks, which allows for effective and integrated financial ecosystems, depends on interoperability. Fintechs should concentrate on creating products that make it easier for various blockchain platforms to communicate with one another, for more seamless and effective transactions. Financial institutions can only provide complete and integrated services in a multi-blockchain environment if they invest in relationships and technology that foster interoperability.
Further Reading: MAS Update: Asset Tokenization in Project Guardian
9. Future of Banking Models
"The broader question remains: is the business of banking, complete with lending and fractional reserves, inextricably linked to payments or is there room for alternative models?" - Anna Roberts, Economist at the Bank of England.
Importance:
This statement questions the conventional banking paradigm (i.e., branches, direct consumer interactions, legacy systems etc) and encourages innovators to consider possibilities for fresh, cutting-edge financial services that keep lending and payments distinct. Fintech companies can create substitute financial frameworks that disentangle loans from payments, providing more specialized and effective services. In order for financial institutions to stay competitive in a changing financial landscape, they should reevaluate their business strategies and look into the potential of alternative structures.
Further Reading: BlackRock Launches New Fund on Ethereum, Bullish on Tokenization
Conclusion
OMFIFs latest tokenisation report shines light on the revolutionary possibilities of tokenisation and blockchain technology for the financial industry. Stablecoins and its programmable characteristics are becoming more popular, and blockchains are predicted to see significant economic activity as well. These developments will undoubtedly promote efficiency, transparency, and inclusion in global banking. Both fintechs and traditional financial institutions must innovate and adapt to stay competitive in this rapidly evolving industry.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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