Don't get left behind: Tokenisation and the new financial revolution

In a world defined by digital transformation, few financial innovations hold as much promise as the tokenisation of assets. It has been a talking point in financial circles for a while now - and for very good reason. In a sense, it has become the very real meeting point between traditional finance and blockchain technology.

Tokenisation refers to the process of turning ownership of a real-world asset like property, stocks, fiat currencies, or commodities into a digital token that lives on a blockchain. Each token typically represents an ownership stake in the underlying asset. As an example, right now Luno offers 58 tokenised US stocks and exchange-traded funds (ETFs) on our app. The uptake since the introduction of these stocks has been nothing short of phenomenal, with our first month projections being achieved in only the first few days. Each token is backed by actual shares held in custody, and its price tracks the real-time value of the underlying stock.

To some it might seem like inserting an "extra step". Why create a token that represents a currency, commodity, an ETF or even real estate, when you can simply invest in "the real thing?" The question ignores the new financial reality in which we all live. And any financial institution that ignores this reality will most likely not survive the financial revolution taking place.

Significant benefits of tokenisation are fractionalised ownership and 24/7/365 trading. Fractionalised ownership means that investors can now easily gain exposure to an asset without having to buy the whole thing. If the markets never close, investors can react to global events, manage their portfolios at any hour, and seize opportunities without waiting. For instance, tokenised investments allow exposure to US stocks in, literally, minutes, whereas it takes up to four days through traditional finance routes.

Apart from this agility, tokenisation also offers increased transparency and decreased costs. Traditional asset transactions often involve intermediaries, each adding fees and delays. With tokenisation, these processes are automated, cutting out middlemen andreducing administration. Many financial institutions recognise the potential of tokenisation, but they often lack the technical infrastructure to implement it.

A lot of people still associate cryptocurrency exchanges like Coinbase or Luno with retail trading - with that lone investor checking and updating his portfolio on his app every now and then. But internationally we are seeing that exchanges, such as the publicly traded Coinbase, are increasingly valued for their expertise in institutional-grade infrastructure. These platforms are creating systems that offer secure custody, compliance tools, liquidity, and advanced trading capabilities.

For banks, asset managers, and fintech firms, digital asset exchanges and other similar service providers are becoming partners in digitising assets, enabling tokenisation, and integrating blockchain-based financial products into portfolios.

Despite their transformative potential, the partnerships between traditional finance players and cryptocurrency service providers are not receiving the attention they deserve. They represent a revolution. To get somewhat technical, even basic services such as over-the-counter trading desks, application programming interfaces, and enterprise-grade account controls, are quietly laying the groundwork for a more efficient, transparent, and programmable financial system.

By the day, the system is being updated through collaborations that enable investors to unlock new revenue streams, improve transparency, and serve a broader, more global client base. New frontiers in tokenisation - in banking, pensions and insurance, for instance - have been identified and are being pursued at pace.Those who called blockchain technology and cryptocurrencies a "passing trend"; 15 years ago have been proven wrong.

Tokenisation will likely be one of the most significant gifts of this new technology to our economy. It is not a trend. It forms the structure of our new financial era. We are moving beyond buzzwords and scepticism. Global consensus is being reached: the future of finance is digital, decentralised, and tokenised.The only question that remains is who will adapt in time? And who will be left behind?

Marius Reitz is the General Manager for Africa at Luno

*** The views expressed here do not necessarily represent those of Independent Media or IOL.

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