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2023 Roundup: The Asset Tokenisation Boom in the Banking World

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Snazzy Tokens, Real-world Impact: Welcome to Asset Tokenisation!

As 2023 dawned, we saw several buzzwords from the crypto universe do a Houdini – disappearing right before our eyes. Remember when we thought algorithmic stablecoins were the rocks of Gibraltar? Turns out, they were as stable as a house of cards in a breeze. And DeFi, hailed as the beacon of decentralisation, showed its centralised underbelly. But amidst these vanishing acts, 2023 has been a game-changer, spotlighting two trends that are not just catchphrases but are genuinely reshaping the financial landscape: Central Bank Digital Currencies (CBDCs) and Asset Tokenisation (AT).

But what in the world is this whole asset tokenisation shindig, anyway?

Asset tokenisation is the process of converting ownership rights to real-world assets into digital tokens on a blockchain. Picture transforming your go-to morning coffee spot’s loyalty points into snazzy digital tokens on a blockchain. Asset tokenisation is like that for real-world valuables. It’s the modern way of making everything digital and tradable—from art and real estate to stocks and sneakers. Each piece gets a unique digital ID, making ownership transparent and divisible. Want to invest in a high-end city apartment? No need to buy the whole thing—just grab a fraction of it as a token. It’s like having shares in anything cool, and it’s all happening on the blockchain. 

Financial titans double down on asset tokenisation bets

In our story from last year, we highlighted how 2022 marked a successful period for asset tokenisation. Moving into this year, the field has seen even more growth and maturity. Banks of various sizes worldwide are now participating, and there’s been increasing endorsement from regulators in several regions. The asset tokenisation experiments involved multiple use cases and asset classes, and a few that piqued our interest include:

  • Liechtenstein-based VP Bank tapped Metaco to expand its tokenisation services and has already tokenised physical collectable items, such as art and jewellery. 
  • OCBC Bank of Singapore globally high-fived ADDX for a tokenisation fiesta involving tokenised equity-linked structured notes to accredited investors.
  • In mid-year, Banco Inter, Microsoft, and 7COMm formed a powerhouse trio to work on the tokenisation of treasury bonds in Brazil.
  • ABN Amro joined the action, partnering with Tokeny to launch a green bond token on the public blockchain.

In the grand parade of partnerships, a handful of big banks decided to throw their own wild party with in-house initiatives for asset tokenisation, such as –

  • Goldman Sachs launched GS DAP™ on the Canton blockchain to speed up asset tokenisation initiatives.
  • In Sep ’23, Citi jumped into the spotlight with Citi Token Services for cash management and trade finance. 

J.P. Morgan unveiled its Tokenised Collateral Network (TCN) to zap traditional assets into the digital age for swift and super-secure on-chain settlements.

Tokenisation tango: banks and regulators bust a move

Although there has been an uptick in tokenisation activity globally, there has been a notable surge, specifically among banks and financial regulators in Southeast Asia and Europe. This growth is fueled by initiatives addressing challenges and seeking solutions for enhanced liquidity, easier access to exclusive investments, transparent ownership records, and reduced administrative trading costs. 

Here’s the lowdown on some of the notable collaborations we’ve got in the spotlight: 

  • The Monetary Authority of Singapore is working with several bank participants (Citi, T. Rowe Price Associates, Inc. and Fidelity International, BNY Mellon, and JP Morgan) to expand asset tokenisation initiatives and develop foundational capabilities to scale tokenised markets.
  • By teaming up with Ripple, Fubon Bank is set to explore a real estate asset tokenisation solution as part of the Hong Kong Monetary Authority’s (HKMA) e-HKD Pilot Programme.
  • The Swiss National Bank, in collaboration with the SDX and six commercial banks (Banque Cantonale Vaudoise, Basler Kantonalbank, Commerzbank, Hypothekarbank Lenzburg, UBS and Zürcher Kantonalbank), is developing a wholesale CBDC pilot to tokenise the franc for settlement purposes.

 

The trend of asset tokenisation is experiencing a notable rise within the banking ecosystem, and the year 2023 has seen a remarkable surge of activity on a global scale. As we reflect on these developments, our anticipation for what 2024 has in store only intensifies. The evolving landscape of asset tokenisation promises further innovation and transformative shifts, making it an exciting journey to watch unfold.



Authors

Fintech Analyst

Samridhi is a fintech analyst within the WhiteSight team, researching fintech trends and providing insights into everything from new markets and investment opportunities. Just like she connects the dots to reveal the big picture of the ever-evolving fintech landscape, she has a keen eye for discovering the brushstrokes of Madhubani paintings and the contours of the hills.

Founder & CEO | sanjeev@whitesight.net

Sanjeev is a fintech aficionado who loves to explore the depths of the industry as much as he loves to explore the depths of the ocean in his scuba gear. He is the founder and CEO at WhiteSight, bringing a wealth of research and advisory experience to the fintech world.

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