Tokenizing assets goes hand in hand with cash on chain

Written by Lewis McLellan, Digital Monetary Institute Editor, OMFIF

Creating a global network of interoperable CBDCs will be no small feat

Tokenisation is an area of great promise for capital markets. Many participants are working hard to create blockchain tokens that represent ownership of a broad spectrum of financial and tangible assets. But to deliver the benefits of tokenisation require a tokenised means of representing cash as well. Of the many benefits that tokenising assets could deliver, the most important is that it enables transactions to take place on a delivery-versus-payment basis. This ensures that one leg of a transaction cannot be sent without the other, thus eliminating counterparty risk. This counterparty risk is a costly and inefficient feature of many markets, since it requires participants to hold collateral against the possibility of a failed settlement. However, this can only exist if both legs of the transaction - the asset and the cash - are both represented on chain.

Overhauling market infrastructure

Stablecoins - cryptoassets …