2022: the advent of institutional tokenization?
The announcement had delighted the Blockchain ecosystem in 2018. SIX Group, the financial company managing the national stock exchange and the SMI index, announced the launch of its SDX (SIX Digital Exchange) initiative. The goal: the creation of an exchange for fast-growing crypto-assets. The promise of being able to list digital assets currently unlisted on the national stock exchange is an innovative one.
The creation of a new capital market for the trading of digitized securities opens up an important spectrum of development for the financial sector.
While tokenization of the capital of SMEs, scale-ups or successful family businesses opens up promising future prospects, it is above all real estate and institutional tokenization that seems to be the most mature and operational today. Funds, funds of funds, hedge funds and other institutional structures lend themselves particularly well to tokenization.
Since the announcement of the launch of the SDX initiative in 2018, and since the first playful papers and articles on the idea of democratized tokenization, innovation has faced two major obstacles.
The first concerns the legal framework which, although a precursor in Switzerland, was not ready in 2018. This has been gradually built up to become sufficiently solid by 2021. The recent announcement of FINMA's green light for SIX Digital Exchange, the crypto-asset exchange, is welcome news, for example.
Finally, the second obstacle concerns implementation by financial markets and players. The rise of NFTs, the fund-raising efforts of companies developing concrete Blockchain solutions, the financial sector's interest in digital alternative investments, the advent of Decentralized Finance (DeFI) platforms like Uniswap or the relevance of increased investment liquidity are all encouraging factors that are necessary for the creation of real trading markets. And many traditional financial players are now immersing themselves in concrete use cases.
2022 is likely to be a turning point in the development of real estate and institutional tokenization.
This raises two key questions: the quality of the crypto-assets on offer, and the number of financial players who can become market makers on secondary markets.
These questions highlight the importance of turning to players with advanced expertise in the financial and legal structuring of these digital assets, as well as in their technological creation. Historic players, such as Wecan Tokenize, a joint venture between blockchain expert Wecan Group, financial firm Geneva Management Group (GMG) and real estate group Capelli, have unique expertise in the field.
Wecan Tokenize, which has been active on the tokenization market since 2017, remains one of the few players still present on the market. The company has specialized in real estate tokenization, and more specifically inequity and asset-backed bonds by tokenizing several million CHF worth of real estate. Since 2020, the company's expertise has expanded into the institutional sector, with partners such as Invesco.
The tokenization of funds, funds of funds or hedge funds is now possible, and paves the way for their increased liquidity.
For hedge funds, tokenization offers considerable advantages. The transparency of a Blockchain-based system increases investor confidence, which could translate into larger investments. The concept of fractional ownership could also catalyze the inflow of additional capital into hedge funds.
Finally, one of the major benefits of tokenization lies in the frequent calculation of fund valuations. Moving from quarterly to weekly valuations, for example, via tokenization would provide investors with a revolutionary information input .
Tokenization has therefore not finished making news, and interactions between Blockchain specialists and financial structures are clearly not going to diminish any time soon.