Will tokenisation deliver efficiency? And what kind?

Udo Milkau
Additional contact information
Udo Milkau: Digital Counsellor, Germany

Journal of Securities Operations & Custody, 2024, vol. 17, issue 1, 79-94

Abstract: This paper attempts to provide a careful and balanced look at some of the benefits and challenges of tokenisation of securities. A fundamental problem is the lack of consistency in how ‘tokenisation’ should be defined. According to a report by McKinsey & Company in 2023, ‘Tokenization adoption was poised for success six years ago, but progress was limited … the path could be different this time’. In the past, tokenisation was: (1) limited to a process of creating a representation of financial, intellectual or physical assets on a blockchain (ie distributed ledger technology [DLT]); and (2) discussed as a narrative of disintermediation and programmability as a basis for efficiency gains. As it became clear that DLT, with its basic game-theoretical approach, comes with high costs and opaque governance, traditional platforms with high efficiency such as the European TARGET2-Security (T2S) with atomic settlement and delivery-versus-payment (DvP) show up as blueprints for efficiency. A proposal of the Bank for International Settlement (BIS) for a unified ledger, Project Guardian of the Monetary Authority of Singapore (MAS), both in 2023, and an announcement of the U.S. Securities Industry and Financial Markets Association (SIFMA) in 2024 about ‘settlement on a common regulated venue … [of] tokenized assets’ can be regarded as paradigms for a new and pragmatic approach, with coordination and synchronisation as key objectives in the context of financial market infrastructures.

Keywords: tokenisation; distributed ledger technology; platforms; operational efficiency; synchronisation (search for similar items in EconPapers)
JEL-codes: E5 G2 K22 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://hstalks.com/article/8816/download/ (application/pdf)
https://hstalks.com/article/8816/ (text/html)
Requires a paid subscription for full access.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aza:jsoc00:y:2024:v:17:i:1:p:79-94

Access Statistics for this article

More articles in Journal of Securities Operations & Custody from Henry Stewart Publications
Bibliographic data for series maintained by Henry Stewart Talks ().