Tokenisation of financial assets: The next step in the evolution of the investment world

While most people will be familiar with bitcoin, a crypto asset or token created through the bitcoin blockchain, what few people are aware of is the ability to use blockchain to tokenise mainstream financial assets.In January this year, Larry Fink , the CEO of BlackRock, said that “the next step will be the tokenisation of financial assets, and that means every stock, every bond … will be on one general ledger.

Most people are familiar with bitcoin, a crypto asset or token that is created through the bitcoin blockchain. However, fewer people are aware of the ability to use blockchain to tokenise mainstream financial assets.

According to global consulting firm McKinsey, tokenisation is the process of issuing a digital, unique and anonymous representation of a real thing.

A digital token can only be created and changed through a blockchain – a network of computers that independently verify all transactions through what is known as a digital decentralised ledger. This code can never be deleted.

This could bring great efficiency and cost savings to the investment world.

While tokenisation of financial assets is still in its early stages, several fund managers, such as BlackRock and Franklin Templeton, are already using tokenised money market funds.

According to projections, tokenised market capitalisation could reach around $2 trillion by 2030.

Bloem highlights the need for the South African economy to expand its entrepreneurial base, as it serves as the foundation for job creation and economic empowerment.

Despite this, traditional networks fail to cater to this segment.

In most developed markets, reverse mortgages or equity release are substantial businesses. However, in South Africa, they remain largely untapped.

This financial instrument allows homeowners to access a portion of the equity in their homes, which can be used for various purposes, such as covering medical expenses or supplementing retirement income.