Tokenization of securities: Corporate DeFi

BlackRock CEO Larry Fink said some important thing in a conference held in early December 2022:

"The next generation for markets, the next generation for securities, will be tokenization of securities." (Reference 1)

In this article I would like to explain what is tokenization of securities and how will it affect the markets.

I would like to explain to you what is tokenization of securities and how will it have a huge impact on the markets.

I re-watched the above mentioned video to note that Fink uttered that very important and profound sentence so well hidden and in such a way that some of the Turkish audience mistook it for any negative comment against crypto assets.  (Please find the link of the conference video below, the important sentence starts at 10:55). To remember BlackRock, please note it is a financial institution in charge of US$ 10 trillion in the worldwide, and the flagship of the Rockefeller Group’s investments.

I took it as a haphazard comment and could not understand it was in fact based on serious research. In researching for this article, I came across a very important document related to this matter.

A new publication, said document brought me to my senses. Described in Reference 2 below, this report was co-written by DBS of Singapore, one of the largest digital banks in Asia, SBI Digital Asset Holding, one of the large financing groups of Japan, Onyx, a blockchain-based bank formed in 2002 by J.P. Morgan Chase (a subsidiary of Rockefeller and J.P. Morgan), and Oliver Wyman Forum. I highly recommend you to read especially the website of Onyx (Reference 3).   This bank is introduced in its website as “…helping to re-architect the way that money, information and assets are moving around the world.” Money, information and assets.

This report was issued only a short time ago, in early November 2022, shortly before Fink’s speech. In other words, the speech given in New York on 5 November 2022, news about it and the above mentioned report are all parts of a package. Now we begin to understand the importance of this announcement. The report announces the start of a new generation blockchain tokenization process and Fink delivers the speech a few weeks later.

Definition of tokenization:
In the blockchain world, the term tokenization refers to a software program in which the digital equivalent of an asset is created in a blockchain and which contains records of the history of transactions and owners thereof.  These records provide an additional way to trade such assets as share certificates, bonds and real estates and even such alternative assets as wine and art, so that all transfers can be recognized in a common accounting book.

Now compare the volumes of various securities in the worldwide:

Crypto currencies:
The present market value of crypto currencies is approximately US$ 1.2 trillion, consisting of 48% Bitcoin and 19% Ether.

Gold and cash:
Total value of all the gold available in the world, including jewelry, is US$ 11.5 trillion. All the cash banknotes and coins available in pockets and safes in the worldwide is US$ 8 trillion.

Real Estate:
However, the total value of all real estates available in the world is US$ 326 trillion. Non-corporate buildings i.e. dwellings represent US$ 260 trillion.

USA market:
Value of the American stock exchange index S&P 500 is US$ 36 trillion.

Can you anticipate the meaning of tokenization of stocks and real estates now?

Institutional DeFi
The above mentioned report introduces a new notion called Institutional DeFi. Quote the first paragraph of the report:

“DeFi protocols have already enabled nascent markets in the crypto-asset industry on public blockchains, such as borrowing and lending as well as decentralized exchanges. Imagine the potential if the technology were to be applied to streamline transactions in foreign exchange, equities, bonds, and other real-world assets. This will require the creation of digital representations, or tokens, of real-world assets to bring them onto the blockchain. The cost savings and new business opportunities of creating a “tokenized” version of real-world assets for transacting through DeFi protocols could be significant for issuers and investors, as well as for financial institutions that can adapt their technology and business models.”

Mentioning that such platforms as UniSwap we use today lack identity solutions to enable institutions to meet anti-money laundering (AML) and know your customer (KYC),  the report heralds that if new generation De-Fi platforms containing the above mentioned solutions are built, all securities enslaved by traditional financing will be tokenized and free! It calls this new generation De-Fi ‘Institutional De-Fi’.  

It seems the BlackRock fund and the Rockefeller Group behind it work to tokenize securities through the blockchain banks they formed against FED and all other central banks related with BIS (Bank of International Settlements located in Basel, called the central bank of all central banks). BIS recently issued the draft crypto bank law to be effective on 1 January 2025. Can you see these two giants setting their sights on all securities and real estate owned by the people, with the goal of gradually disconnecting said assets from the traditional fiat monetary system and transferring them to a tokenized system?

Conclusion:
This article looks at the future plans of BlackRock, controlling assets worth US$ 10 trillion and one of the largest funds in the world, for DeFi and tokenization. Imagine the real estate market worth 100 to 150 times the total value of all crypto currencies, stocks worth 100 to 150 times the same, and gold and cash worth 6 to 7 times the same are turned into ERC-20 and ERC-721 tokens and are traded in De-Fi exchanges. What if they also plan to add private and public sector bonds and transfer all assets owned by mankind to the blockchain? I won’t be surprised if this company changes its name to BlockchainRock.
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Note: The first version of this article was published on 20 December 2022 in BTCHaber.com.

Cemil Şinasi Türün
Chairman of Advisory Board
Cropto

References:
1) https://decrypt-co.cdn.ampproject.org/c/s/decrypt.co/116145/blackrock-ceo-says-next-generationmarkets-is-tokenization?amp=1&fbclid=IwAR24dM2f4j8VRUJSopbdvdqK898AMjgsr0gcD3UtTQcRNj7iIe4NC0gGGTw
2) https://www.jpmorgan.com/onyx/documents/Institutional-DeFi-The-Next-Generation-of-Finance.pdf
3) https://www.jpmorgan.com/onyx/index.htm 4) https://youtu.be/PSVpth7uqb4