The tokenisation of physical assets refers to the creation of a tamper proof, unique and legally enforceable digital representation of a physical object. It opens a world of opportunities as the physical objects which were earlier consigned to specific markets are now available to global investors. The earliest example of the tokenisation of an asset was when a $30 million luxury Manhattan condo development was tokenised on Ethereum. Ernst and Young in the paper ‘Tokenisation of Assets – Decentralized Finance’ state that “the process of tokenisation creates a bridge between real-world assets and their trading, storage and transfer in a digital world” (https://assets.ey.com, 2020).
In the previous parts of this series, we’ve been looking at the regulation needed in order to encourage the adoption of stablecoins for retail payments (read Part 1 and Part 2 here).
Notwithstanding the similarities between bank deposits and stablecoins, there are some notable differences. For instance, a stablecoin issuer can allow the stablecoin to be listed on (crypto) exchanges and trading venues. In contrast to stablecoins, bank deposits are not tradable, i.e. there is no secondary market for bank deposits. In practice, issuers of the stablecoins are also operating the exchanges where their stablecoins are traded alongside other cryptoassets. But stablecoins can also be listed on...
In our two previous blog posts on stablecoins and CBDCs, we have discussed why the speed of market acceptance of stablecoins has constituted a financial stability concern for oversight authorities, pushing them to speed up their discussion around building appropriate legal frameworks to regulate new payment solutions.
We have also explored the acceleration of CBDC discussions in response to the perceived threat to existing currencies that central bankers see in stablecoins.
In the third and final blog post of this series, we highlight that several traditional market players have demonstrated their intention to explore and enter the stablecoin/DeFi space as a competitive response.
Here at Fnality International, we were pleased to see Christina Segal-Knowles, Executive Director, Market Infrastructure Directorate at the Bank of England address the challenges and opportunities in payments post Covid on 11th June 2020. The key points that we take from the speech are as follows:
Solving for on-chain payment in wholesale banking
'Stablecoins' are typically viewed as a proxy for money, so we do need to be careful about their use and the potential risks that they create. To this end, the FSB has authored a paper on stablecoins: "Addressing the regulatory, supervisory and oversight challenges raised by “global stablecoin” arrangements”.
Do we need to change thinking on value-date i.e. the date on which a transaction actually takes place? We’d love to hear your views.
Where’s the headphone jack on the latest iPhone? There isn’t one. If you want to use headphones, you need an adaptor. Compatibility is always a consideration when you try to take a big leap forward.