ENTERPRISE TOKENIZATION 101

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Opportunity.

The asset tokenization industry is projected to grow at 60% CAGR during this decade

Source: https://hackernoon.com/market-outlook-on-tokenized-assets-a-usd24trn-opportunity-9bac0c4dfefb

DELOITTE: The Tokenization of Assets is Disrupting the Global Financial Industry. Are You Ready?

NASDAQ: Why Tokenized Finance is Finally Ready to FulFill Its Promise

HACKER NOON: The Era of Tokenization – Market Outlook on a $24-Trillion Opportunity

Use Cases.

Tokenized assets have a wide range of use cases

Value Storage
Exchange
Payments
Lending
Escrow
Settlement
Remittance
Alternative Banking
Powering DeFi

Tokenization Benefits.

Blockchain-powered assets are the next evolution of money

Faster and Cheaper

Tokenized assets can be sent and received within a few minutes for only pennies in blockchain network fees

Liquid and Fractional

Tokenized assets enjoy very high secondary market liquidity and can be fractionally traded

Transparent and Secured

Blockchain transactions are publicly verifiable and tamper-proof

Open and Borderless

Asset-backed tokens can be sent to anyone globally who has Internet access

WHAT Can Be Tokenized?

Fiat Currencies
Precious Metals
Commodities
Real Estate and Securities

WHY Do We Tokenize?

For businesses with existing commodities or assets in need of liquidity:
  • Unlock liquidity from crypto markets
  • Open new distribution channels
  • Shorten inventory turnover time
  • Fetch potentially higher valuation
  • Enhance marketing and brand image
For businesses with a lot of users / ecosystem activities / network effect:
  • Upgrade legacy payment systems
  • Upgrade legacy gift card systems
  • Upgrade legacy loyalty programs
  • Increase sales and reduce costs
  • Enhance marketing and brand image

WHO Should Tokenize?

For businesses with existing commodities or assets in need of liquidity:
  • Metal and commodity dealers
  • Art, antique, collectible dealers
  • Jewelry and gem dealers
  • Real estate investment companies
  • Invoice financing companies
For businesses with a lot of users / ecosystem activities / network effect:
  • Exchanges and lending platforms
  • Banks, FinTechs, payment firms
  • Major brands w/ gift cards and loyalty
  • Online marketplaces, e-commerce
  • Retailers, wholesalers, merchants

HOW Do We Tokenize?

Create a business plan and design the tokenomics

Select a friendly jurisdiction for the project and obtain a legal opinion from a local law firm

Partner with a regulated trustee, custodian and auditing firm for the project

Develop traditional infrastructure, including partner API integrations, offchain database and user interface. Then, develop blockchain infrastructure, including smart contracts

Set up a trust to hold collaterals for the benefit of tokenholders (or the trustor), with you or an SPV as the trustor. Then, appoint the trustee to:

    • KYC / AML verify trust beneficiaries
    • Custody / receive / disburse funds and assets
    • Issue (mint) and redeem (burn) tokens
    • Work with the auditor to verify collaterals

Create a transparent terms and conditions for the project, including fees, redemption policy, asset management policy and holder rights, etc. to create contractual obligations for the token product

WHERE Should We Tokenize?

For businesses that are looking to launch stablecoins / convertible virtual currencies / commodity-backed tokens:
  • Many countries require a payments license to issue virtual currencies
  • The US is a jurisdiction where you can legally issue stablecoins and commodity tokens as convertible virtual currencies
  • Avoid certain jurisdictions that may also treat pooled commodities as securities
For businesses that are looking to launch real estate / security tokens:
  • Only do so in jurisdictions that legally support blockchain-based securities to limit legal risks
  • In many jurisdictions, security tokens can only be traded / transferred on regulated networks
  • In the US, security tokens must be registered with the SEC and can only trade on regulated ATS platforms (e.g. tZERO, SharePost)

WHEN Can We Tokenize?

For businesses that are looking to launch stablecoins / convertible virtual currencies / commodity-backed tokens:
  • NOW is a great time to launch your project
  • There are many precedents of stablecoins, CVCs and commodity tokens being issued compliantly by companies based in the US
For businesses that are looking to launch real estate / security tokens:
  • It is NOT a good time to launch your project in heavily regulated jurisdictions such as the US due to higher costs and lower liquidity
  • It is POTENTIALLY a good time to launch your project offshore in either unregulated or less heavily-regulated jurisdictions due to bullish crypto market valuations. If so then users from the US, EU and certain other high-risk jurisdictions must be blacklisted and you cannot market your products and services in those regions