By: Luiz Doles

Over the last decade, the rapid evolution of new technologies in the areas of information and communication has been reshaping the structure of financial systems and the investment industry. As a result, in addition to the market's perception that technological innovations can enable the creation of new products, central banks and other financial regulators have been supporting this innovative drive through various initiatives.

In this sense, the asset tokenization, in order to increase the efficiency of traditional markets, thus presenting the potential impacts on the arrangement of the securities industry, made possible through technology blockchain, whose new solutions are developed, in addition to increasing the efficiency of applications.

Tokens are digital representations of fractions of assets that have commercial value and they can represent both tangible assets such as equipment, real estate or works of art, as well as intangible assets such as patents, copyrights and digital works of art.  

In this sense, asset tokenization is understood to be nothing more than the transformation of “physical” assets into digital assets, through a process of digital representation of the economic value and rights of a pre-existing real asset or the issuance of traditional asset classes in the form of tokens. This process therefore allows tokens to be traded between people anywhere in the world with ease and extreme security.

A relevant aspect of asset tokenization is the multiple possibilities for applying distributed ledger technology, which has a significant impact on all capital market activities. The technology used by these is distributed ledger technology (DLT), which consists of a technology for storing and editing shared data. It is possible to store information in digital copies, keeping it available in different locations on the same network, sometimes eliminating the need for a centralizing entity. This DLT technology introduces some changes in the operation of capital markets, such as faster processes, a greater variety of digital assets traded, develops new payment methods, reduces costs since many processes are automated, in addition to greater transparency and compliance with regulatory bodies, and increases new roles for traditional players in the financial ecosystem, opening space for the creation of new assets and markets, and multiple possibilities for traditional players in the financial ecosystem to act.

This technology is extremely relevant as it allows securities, commodities and any assets (financial and non-financial) are converted into encrypted digital assets, registered and transacted on a decentralized network.

Furthermore, it is important to emphasize that the tokenization of assets is based on a market mentality focused on collaboration and technological advances, in addition to a system that decentralizes information and eliminates intermediaries in a safe and transparent manner. Thus, it can be stated that blockchain is a secure service used to record monetary transactions on its decentralized network of computers. Thus, it can be said that blockchain is a decentralized public ledger computing network.

In short, a tokenized asset is a legally partitioned asset digitally registered on a network. blockchain, which guarantees the security of all transactions. It is this technology that allows the exchange of information in a decentralized manner, in which all participants in the network guarantee the veracity of the terms and conditions of a transaction.

There are two main types of token: fungible tokens, which are divisible into exactly equal and interchangeable parts, and non-fungible tokens, which are unique and indivisible into equal parts, the parts of which are not interchangeable.

In some cases, token returns vary depending on the asset's appreciation, but they can be predefined or work in other ways. Returns are always relative to the type of asset. This means that it is possible to invest in any asset, including high-performance ones, which are generally restricted to large investors and financial institutions.

Following the example of the tokenized debentures by Salinas Participações, coordinated by Itau BBA, with a volume of R$ 74 million, represented by 74,000 tokens of R$ 1 thousand each. Another large issuance was of tokenized shares of QR Rispar Crédito Cripto, a credit rights fund, launched by QR Asset. The raising was R$ 8 million, represented by 8,000 tokens of R$ 1 thousand each. Both offerings were aimed at qualified and professional investors. Furthermore, tokenization is opening doors to alternative and innovative investments that represent new opportunities for diversification and asset allocation.

Industry experts and market agents believe that the evolution of these and other financial asset tokenization projects in the regulated market should happen at a certain speed, but gradually, reaching small investors in a few years and with an offer of investment products that are currently not accessible to provide companies with access to capital at lower costs.

Finally, it should be noted that, as with any other type of financial investment, investing in tokenized assets also requires an assessment of the risks involved. Many of the risks to consider before investing are the same as those of investments in general: performance, the macroeconomic context, speculation, and liquidity. In the case of tokenization, and cryptoassets in general, the volatility characteristic of these assets must also be considered.

Therefore, before carrying out any operation, it is advisable to carry out a risk assessment according to each specific investment in accordance with all the points brought up above. The key to understanding the true potential of tokenized assets always begins with a detailed view of the concept itself.

With the collaboration of Andrea Carvalho