Banks' Traditional Model Faces Disruption
In the ever-evolving world of finance, a new method is making waves - tokenization. This innovative approach aims to make real-world assets more accessible to smaller retail investors by offering them shares in these assets.
The regulatory landscape in Germany and the EU is adapting to accommodate this change. Tokenized securities are considered part of the MiFID (Markets in Financial Instruments Directive) world, as they are real securities. On the other hand, other tokens fall under the purview of MiCA (Markets in Crypto-Assets Regulation), a complex and costly regulatory framework, particularly for start-ups, with some requiring at least 20,000 euros on a lawyer before a token can appear on their website.
As technology advances, the future of traditional banks remains uncertain. Transactions can now be executed without the need for banks, raising questions about their role in the future.
However, tokenization of real-world assets introduces additional risks. The interface between the real world and the blockchain can cause issues, potentially leading to complications.
One company, coinIX, has successfully digitized fund shares and connected the traditional banking world with the blockchain-based security. They have also managed to offer temporal flexibility, allowing for 24/7 transfers, and instant settlement, a significant advantage, particularly for institutional investors.
In Germany, a crypto custodian is required for electronic securities, which must whitelist the corresponding wallets and perform a know-your-customer check. This adds an extra layer of security to the transactions.
Tokenized securities also offer additional transparency. Investors can see on-chain how many shares have been issued and track transfers, providing a level of visibility that is not always available in traditional finance.
Stablecoins, a type of token, are gaining popularity and offer the opportunity to earn interest. However, the regulatory landscape for stablecoins is still evolving, particularly in the US, where the new government may allow for an increase in their emission.
Interestingly, a growing generation between 16 and 25 years old is actively investing in crypto markets and does not have traditional bank accounts. This shift in investing behaviour could have significant implications for the future of finance.
As more pilot projects test trading with electronic securities, and intelligent products from major players significantly allocate to tokenized, digital securities in the next two years, the landscape of finance is set to change dramatically. Traditional exchanges, clearing houses, and even Clearstream may become obsolete as everything may run on blockchain in the future.
However, it's important to note that there may be a conflict of interest in this publication. The board and majority shareholder of the publisher Börsenmedien AG may have positions in the financial instruments mentioned in the publication or related derivatives.
Moritz Schildt, CEO of coinIX, sums it up by stating that tokenized securities are revolutionizing the financial market. The advantages of instant settlement in tokenized securities are enormous and will play a crucial role everywhere, similar to how email replaced letters. The future of finance is undoubtedly digital, and tokenized securities are at the forefront of this revolution.
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