Tokenization Q&A: Jay Biancamano, State Street12.27.2019
Tokenized assets, whether cryptocurrency, securities, or other instruments, have generated a lot of interest on Wall Street, but have those conversations gone from theory to practice? IntelAlley spoke with Jay Biancamano, managing director, digital product development & innovation at State Street, regarding the latest developments in the world of tokenized assets.
When speaking to institutional investors regarding tokenized assets, does the conversation usually stress the “tokenized” or the “assets?”
We try and focus on the tokenization of “traditional” assets, so you could say we stress “tokenized.”
How has this changed in the past 12 months?
Much of the early focus was on cryptocurrencies, specifically bitcoin. However, it has moved away from that towards the tokenization of both traditional and illiquid assets.
Are cryptocurrencies or tokenized assets gaining the most traction with asset managers?
We can only talk about what we’ve heard from our clients. Speaking to them, we haven’t seen much of an increase in demand for services for cryptocurrencies. Tokenized assets, on the other hand, are gaining attention, but as of yet, there have not been any instances where Institutions have looked to invest.
One of the problems is that no one is going to invest simply because the asset is “tokenized.” What I mean by that is, most if not all investment managers look for investment quality of the underlying, and that alone should be what motivate asset managers to invest. Some of the early tokenized assets that may not be investment quality or maybe in assets, such as real estate or intellectual property, in which they primarily don’t invest.
Which of the two asset classes do you expect to see the quickest adoption by the buy side? Do each face the same hurdles?
I see most of the early adoption likely to be in private markets, and probably in the credit/fixed income space. Equity markets, for the most part, are fairly efficient, and the benefits of tokenization are not likely to increase interest in the short term. They both face significant hurdles, especially around regulation, but I think we’ll see regulatory clarity spark interest over the next few years.
How soon before the industry sees a tokenized asset that is not a tokenized version of an existing type of security, debt instrument, or investment contract?
We’re already seeing real estate and other tangible assets being tokenized, so tokenization is happening. However, if you are asking when will we have a “token-only” version of a traditional asset, we’re close.
There have been several proofs-of-concept that have been made public to prove the viability of doing so. That being said, both issuers and asset managers need to understand the benefits of tokenization and have either the same or better experience than they are provided with now. Ultimately it shouldn’t matter if an asset is digital or otherwise, it just needs to be a good quality investment.
This may lay foundation for interoperability between participants and systems for tokenized assets.
Growth comes as the crypto winter is prompting capital to focus on more viable blockchain use cases.
Monetary Authority of Singapore is launching Project Guardian to explore tokenisation.
Firms on the Swiss tokenization platform can issue equities seamlessly in SDX's regulated CSD.
Sequoia Crypto Fund will participate more actively in protocols and better support token-only projects