What is an Asset Tokenization Platform?
Asset tokenization platforms convert real world assets into digital tokens. The process is referred to as Tokenization as a Service (TaaS). It is possible to tokenize any asset: real estate, VC funds, precious metals, equity shares, physical goods, intellectual property, sports teams, music, art, or collectables.
Asset tokenization platforms are used by financial institutions and institutional investors. Tokens turn art into a commodity, allows VC investors to monitor their investments without an intermediary and when tied to an external reference (stable coins) provide liquidity for crypto exchanges.
Digitized assets can be broken down into three categories:
Intangibles, such as copyrights, carbon credits, and patents
Fungible assets that can be replaced, such as gold
Non-fungible assets that are unique, such as a work of art
Asset tokenization usually follows these core steps:
Selection of asset
Evaluation and pricing of asset, including identifying relevant jurisdictions and regulations
Asset tokenization by the asset tokenization platform’s technology, creating legally compliant tokens
Asset tokenization platform provides an issuer/investor fund management dashboard with investor verification, KYC, AML, fundraising, and investor voting rights features included.
Token offering through a Tokenized Assets Offering (TAO) for investors to purchase (primary market). Smart contracts built into the asset tokenization process automate regulatory compliance, eliminating need for intermediaries such as transfer agents. These offerings are known as Security Token Offerings.
The token is listed on Security Token Exchanges for investors to trade on the secondary market or OTC.
Asset Tokenization Platform Features
Asset tokenization platforms possess most or all of these features:
Produces legally compliant digital tokens representing real-world assets
Built-in smart contracts
Issuer/Investor fund management dashboard
Investor voting rights
Assist with evaluation and pricing of assets
Token Asset Offering / Security Token Offering
Token lifecycle management (issue, withdrawal from circulation)
Asset Tokenization Platform Comparison
Consider the following before entering the asset tokenization market:
Implementation: Due to the complexity surrounding the tokenization of assets, unless your organization has the in-depth skills and resources to develop a platform, a vendor platform and services should be utilized to tokenize your assets.
White Label: Vendors offer customized end-to-end tokenization, for issuers and their specific industry, product, or resource.
Integration: Investigate how your platform selection will integrate with existing systems, especially if the organization is already leveraging other blockchain-based tools.
Regulatory: Explore the regulations in your industry and location. Tokens must be compliant in both the issuer and investor jurisdictions.
Asset tokenization platforms have significant costs depending upon the features. Asset token packages start around $30,000 and can range up to well over $100,000. Most vendors require obtaining a quote as tokenization requirements can vary greatly.
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Frequently Asked Questions
Leading benefits of asset tokenization platforms include:
- Improved Liquidity: Tokenization creates liquidity for illiquid assets, unlocking their value
- Expands Investment Base: By fractionalizing ownership of assets, this lowers the minimum investment threshold, allowing smaller investors to invest in assets previously considered not practical due to the high price of investment.
- Globalization: Tokens can be used for global transactions and borderless trading
- Cost Savings: Reduction of trading spread charges, elimination of middlemen, and less expensive transaction costs.
- Availability/Access : 24/7 market availability
- Digital assets are easier to manage.