For some time now, the concepts of asset tokenization and digital tokens have been gaining much traction in the FinTech industry with the latter being used to represent various assets on a blockchain.
In this post, we will define digital tokens, tokenization, and highlight the benefits of this trend in financial services. In addition to that, we will examine what prevents financial institutions from adopting this technology and give excellent examples of digital tokens in use.
Firstly, What Is a Digital Token?
What exactly are digital tokens? They are a type of crypto asset, commonly referred to as cryptocurrencies, that act as a tradable item for a digital representation of a particular asset. With that said, how are assets converted into tokens? Here comes assets tokenization.
Simply put, it refers to the process of subdividing huge assets, for example, real estate, into smaller parts. Each part is then represented by a specific token with its ownership stored on a blockchain ledger system. Tokens are traded on a secondary market.
That said, what is a cryptocurrency token? It is an item on a DCL (distributed consensus ledger) which acts as a mode of exchange and a unit of account. Cryptocurrency tokens can be obtained, transacted, stored, and accessed electronically. They facilitate peer-to-peer exchange without the need of going through a third-party intermediary.
Benefits of The Digital Token System to Financial Functions
CFOs should adopt this technology in everyday financial activities to take advantage of the many benefits of blockchain tokenization. Some of these advantages are:
Improved liquidity and accessibility
Lower transaction fees
Improved transparency in transactions
What Prevents Financial Companies from Adopting This Technology?
Given that the finances sector is heavily regulated, tokenization has to overcome several impediments before it is accepted widely. Integrating and aligning with the current regulations is the essential thing because these laws exist to protect property owners. Therefore, asset-backed tokens will only be widely accepted when existing financial laws wholly incorporate blockchain platforms.
Apart from regulatory problems, tokenization has to clarify how tokens are connected to various assets. And last but not least, token network governance is yet another issue that needs to be addressed to ensure wider adoption of this technology.
Excellent Examples of Tokenisation
What does make this platform stand out? Vaultoro keeps client identity in privacy when using a transparent, public audit of bitcoin and gold holdings. It is the only one bitcoin system promising complete ownership to clients’ wealth even if Vaultoro crashes.
To conclude, we would emphasize the importance of using tokenization in the FinTech industry. With this technology, companies can quickly achieve better competitiveness by tapping into the transparency, liquidity, and accessibility provided by asset tokenization. To get the best results out of the digital token system for your company, contact inVerita, a trustworthy software company experienced in asset tokenizing procedures.