Why is Tokenization a big trend? First Q&A of The Token Club

In our first Q&A of “The Token Club,” we discussed “Why Tokenization is trending in 2024?”

During this fascinating session, experts answered key questions about how tokenization is reshaping financial markets and business operations.

Below we share with you the most noteworthy answers so you'll be sure to join the next Q&A.

How is the EU Pilot Regime developing?

The European Union (EU) Pilot Regime, in tandem with the Markets in Crypto-Assets (MiCA) regulation, is part of a broader regulatory effort to encourage tokenization.

Experts highlighted the following points:

Purpose: The Pilot Regime allows companies and financial markets to experiment with issuing and trading tokenized securities in a supervised environment. This acts as a regulatory sandbox where regulators and market participants can learn before implementing permanent rules.
Implementation: Operators of market infrastructures, such as stock exchanges, can apply for licenses to operate blockchain trading systems. This ensures security and efficiency through distributed ledger technology (DLT).
Innovations and Testing: The regime facilitates the creation of test markets for tokenization of various assets, from bonds to stocks, which offers faster settlement and reduces operational costs.

How is the Pilot Regime being adapted to regulations in other EU countries?

Experts explained that the Pilot Regime is flexible enough to be adapted by each EU country while ensuring harmonization:

Flexibility and Harmonization: it provides scope for each country to adapt its laws and authorize secondary markets in blockchain with varying degrees of decentralization.
Cross-Jurisdictional Collaboration: Regulators collaborate to ensure rules are consistent across member states, promoting infrastructure interoperability.
European Passport: Entities authorized in one member state can operate in other countries thanks to the European passport, facilitating access to tokenized markets.
Coordination with MiCA: The Pilot Regime is aligned with the MiCA regulation to ensure uniform treatment of security tokens, providing clear rules for their issuance, custody and trading.

How is maritime trade improved by tokenization of shipping information?

Experts highlighted how tokenization of shipping information benefits global trade:

Digitization and Accessibility: Tokenization transforms bills of lading into digital assets on blockchain, eliminating the need for physical documents. Stakeholders can access data in real time.
Traceability and Transparency: It creates an immutable and verifiable record of transactions, allowing the status and location of goods to be tracked, reducing the risks of fraud or tampering.
Operational Efficiency: Tokens can be transferred in seconds, eliminating delays related to physical documents. Smart contracts speed up transactions and reduce costs.
Security and Fraud Protection: Tokens are cryptographically protected, making tampering or counterfeiting difficult. Only authorized parties can modify the content.

How can the Pilot Regime help companies to finance themselves, and which professionals can be positively affected?

Experts explained that the Pilot Regime facilitates access to new sources of capital for companies:

Access to Capital: allows companies to issue tokens representing shares or bonds, providing access to global investors in an efficient manner.
Issuance Efficiency: The blockchain reduces creation and distribution costs, while smart contracts automate transactions and eliminate intermediaries.
Rapid Settlement: Tokens enable rapid settlements compared to traditional markets, reducing counterparty risk and improving efficiency.
Increased Transparency: Blockchain provides a transparent record of all transactions, increasing investor confidence.

Positively Affected Professionals:

Lawyers and Legal Advisors: Financial law specialists are needed to design compliant token offerings.
Financial Consultants: Advisors can help develop token-based financing strategies.
Auditors: They are needed to ensure that assets are backed and transactions are verifiable.
Blockchain Developers: Developers with expertise in smart contracts will be in high demand.
Analysts and Investment Managers: Fund managers and analysts specializing in digital assets can diversify portfolios and meet the growing need for technical analysis.

Join the next “The Token Club” Q&A to get clear, personalized answers from experts that will help you move faster in the world of tokenization, with less effort than doing it on your own. These conversations allow you to create strategic links with like-minded professionals, helping you identify opportunities and share strategies that will benefit your business or professional development.

We look forward to seeing you inside!