Crypto technology and ETFs : The tokenisation revolution
The future is coming
Authors : Marcus Grubb and Nitin Gaur
Travel is an often-cited example of an industry that was hit by a swift wave of disruption by the advent of online commerce .
And it is true that the websites and apps holidaymakers use to book their trips more cheaply and conveniently than before are here to stay and will continue to take market share from traditional travel agencies . However , the internet has yet to replace the aeroplane as their primary mode of transport , or the beach as their ultimate destination . Similarly , Amazon may have disrupted the record store , and Spotify the actual record and the record label , but the songs people listen to still sound the same .
The technology underpinning crypto currencies could dramatically alter the way other financial assets are utilised in investors ’ portfolios as well as distributed by managers and other financial service providers in the same way as technology has revolutionised the industries above – by reducing the costs of management and distribution and bringing greater choice and easier interfaces to investors .
At State Street , we have had numerous discussions with clients , regulators and industry stakeholders about the transformative potential of
blockchain and distributed ledger for the asset management industry .
One longstanding trend that is likely to be more fully realised by this technology than has been possible up until now , is the creation of liquid , daily tradeable assets out of illiquid assets like real estate , infrastructure and private equity .
The ‘ fractionalisation ’ of these assets – creating digital tokens or ‘ token-shares ’ that represent shares in a physical building or recreate the liquidity and ease of trading of listed equity – is a step forward in the direction the
Chapter 4 : ETP structure
industry has been attempting to travel for a long time using derivatives and unitised property funds .
The tokenisation of these assets either as issued digital securities or as digital representations of ownership permits atomic settlement , reducing costs and capital requirements and enables the expansion of eligible collateral and near instantaneous movements of liquidity .
This particular benefit of tokenisation will especially be felt by retail investors , who have long been searching for more and better access to these predominantly institutional , private market asset classes , but unable to easily or cheaply access them through retail and defined contribution portfolios with compulsory liquidity requirements .
Indeed , research from digital assets platform Finoa , projects that alternative assets ,
The extent of blockchain ’ s future impact is comparable to the introduction of the internet