Consideration On Better Tokenization Practices And Regulations Concerning Investor Protection

Yuta Takanashi (), Shin'ichiro Matsuo, John Jacobs, Eric Burger, Clare Sullivan, James Angel, Tatsuya Saito, Toshiki Hashirisaka and Hirotoshi Sato
Additional contact information
Yuta Takanashi: Georgetown University, Postal: 3700 O St NW, Washington, DC 20057, United States
Shin'ichiro Matsuo: Georgetown University, Postal: 3700 O St NW, Washington, DC 20057, United States
John Jacobs: Georgetown University, Postal: 3700 O St NW, Washington, DC 20057, United States
Eric Burger: Georgetown University, Postal: 3700 O St NW, Washington, DC 20057, United States
Clare Sullivan: Georgetown University, Postal: 3700 O St NW, Washington, DC 20057, United States
James Angel: Georgetown University, Postal: 3700 O St NW, Washington, DC 20057, United States
Tatsuya Saito: Mitsubishi UFJ Trust and Banking Corporation, Postal: 4-5, Marunouchi 1-Chome, Chiyoda-ku, Tokyo 100-8212, Japan
Toshiki Hashirisaka: Mitsubishi UFJ Trust and Banking Corporation, Postal: 4-5, Marunouchi 1-Chome, Chiyoda-ku, Tokyo 100-8212, Japan
Hirotoshi Sato: MUFG Bank, Ltd., Postal: 2-7-1, Marunouchi, Chiyoda-ku, Tokyo, Japan

Journal of Financial Transformation, 2020, vol. 51, 44-54

Abstract: Tokenization is expected to improve the way people trade various types of assets by using technologies, such as blockchain and smart contracts. However, it is important to understand how it is similar to, and different from, traditional securitization mechanisms in order to evaluate tokenization as an asset mobilization mechanism. This paper establishes evaluation criteria, such as bankruptcy remote, legal certainty of transactions, transparency, liquidity, and finality, and applies them to both securitization and tokenization. We find several areas where tokenization could improve securitization as well as areas in which tokenization itself needs improving. While tokenization could increase certain aspects of transparency, such as traceability, enhanced liquidity, and reduced settlement risks, in certain cases investor protection is not enough. We discuss the ways in which practices of tokenization could be enhanced in order to ensure investor protection, especially focusing on bankruptcy remote, perfection of transactions against third parties, disclosure, ratings, and finality. These additional practices could increase costs and complexities of tokenization, but they are necessary to ensure that there are adequate levels of investor protection, which is a prerequisite for an asset mobilization mechanism.

Keywords: Blockchain; Tokenization; Securitization; Government Policy and Regulation; Crypto Assets (search for similar items in EconPapers)
JEL-codes: K22 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1650

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