Tokenization likely to transform financial markets, says BoA

Tokenization is the process by which real-world assets are turned into blockchain-based tokens

Tokenization is just one application of blockchain technology, but it is the one that could change financial and non-financial infrastructure and financial markets over the next five to 15 years, Bank of America (BoA) said in a research report Thursday.

We are on the edge of an infrastructure evolution that may reform how value is transferred, settled and stored across every industry, according to analysts Alkesh Shah and Andrew Moss.

Tokenization is the process by which real-world assets are turned into blockchain-based tokens.

The analysts stated that the tokenization of conventional assets and issuance of assets in tokenized form have the potential to raise productivity and lessen costs across an asset’s life cycle, enhance the efficient allotment of funds, optimise international supply chains, catalyze a new generation of SaaS firms and finally drive mainstream adoption.

BoA observes that disruptive technology such as radio, television and email took thirty years to achieve mainstream adoption. It anticipates much lesser time for digital assets.

BoA added that the implementation of blockchain technology will speed-up among financial institutions and corporates as the opportunity cost of uncaptured efficiencies rises.

Distributed ledger technology and tokenized traditional assets are not ‘crypto,’ according to the report, which added that blockchains record ownership of the 26,000+ tokens that exist within the digital asset ecosystem, but we anticipate 99 per cent of those in existence today to fade over the next decade.

Memecoins such as shiba inu and pepecoin get a lot of focus in spite of having no utility or intrinsic value, but other tokens are different, the note noted.

Public permissionless blockchains including Bitcoin, Ethereum and a few third-generation blockchains are decentralized and need tokens to reward participants for processing transactions on the network, the report observed.