Tech
Value of tokenization in financial services: PwC
Guidelines to enable successful tokenization
While we’ve simplified tokenization here, there are several complexities to think about when building your project, including ecosystem and scale considerations, operational considerations, product design considerations, and wallet management considerations. Five guidelines can help you find your way forward.
- Find what is doable and valuable. Identify and map realistic opportunities to simultaneously deliver short-term value, often by strengthening your core business, and expand long-term capabilities. It’s usually best to focus less on isolated use cases and more on features. When well implemented, the same core functionality often just requires tailored additions to support many different and valuable use cases.
- Evaluate the challenges. Once you’ve identified the capabilities you need, prepare for the challenges: technology, skills, culture, security, risk management and more. Be sure to consider the need for interoperability, which is the ability to move tokenized assets across separate networks or technology stacks.
- Understand your stakeholders. Whether your initiative has only internal stakeholders or involves counterparties, customers or investors, outline how tokenization can provide value and increase their confidence.
- Build trust into. An effective way to ensure trust is to put it at the forefront, starting from the design phase. Build oversight capabilities into your organization, create or improve controls for digital assets, upskill risk professionals, and be prepared to comply with regulatory, legal, and tax requirements.
- Learn from others. Bitcoin just turned 15 years old. In traditional finance (TradFi) this may be young in terms of currency, but in innovation it is not. There are people with deep experience in the nuances of tokenization technologies and their implementation. For both initial and more complex tokenization initiatives, consider teaming up with digital natives or other trusted organizations that have a long history and extensive knowledge of digital assets and tokenization.
Once a tokenization initiative is up and running and ROI is achieved, it becomes easier to quickly implement others. As tokenization becomes increasingly integrated into the technology stack and business processes, it is likely that more and more net new uses will become evident. You may soon find that tokenization has enabled a new paradigm and become a reliable foundation for near-instant, transparent, and hyper-personalized financial services, along with fast, low-cost settlements and increased liquidity across a wide range of assets.
1 Jodi Xu Klein, “The $1.5 Trillion Private-Credit Market Faces Challenges,” The Wall Street Journal, October 16, 2023, accessed via Factiva, February 6, 2024.
2 Aruni Soni, Surge in Treasury Yields Boosts Tokenization of Real-World Assets on Blockchains, Driving a ‘Huge Paradigm Shift’ in Finance, Business Insider, November 12, 2023, accessed via Factiva, January 25, 2024.
3 Luisa Crawford, “Global Supply Chain Financing: A New Era of Resilience and Diversification,” Blockchain News, January 24, 2024, accessed via Factiva, January 25, 2024.
4 Miriam Cross, “Large regional bank invests in startup deposit network,” American Banker, January 23, 2024, accessed via Factiva, January 25, 2024.