Written by Jonny Fry CEO Team Blockchain Ltd and an advisor for a number of firms as well as Chairman of Gemini Capital UK.
There continues to be much confusion around digitalisation of real-world assets (sometimes referred to as tokens) and cryptocurrencies. Whilst cryptos and tokens both use blockchains and distributed ledger technology, major corporations, central bankers and governments are increasingly beginning to realise the transformative potential that tokenisation offers their customers and citizens.
Why is tokenisation both relevant and important for the EU?
A German firm, Roland Berger, has recently signed up BBVA, Commerzbank, Deutsche Bank and Santander, together with some large manufacturers such as Daimler Trucks, Renault and Repsol. The initiative, Tokenise Europe 2025, was initially organised by the German banking association but subsequently Spanish, Italian and Liechtenstein banks have joined, along with payments businesses such as Iberpay and Worldline.
According to a report from, Tokenise Europe 2025: “A Token represents an asset in a digital form combined with information and assignable digital rights, all of which are connected in a programmable and heavily automated way.” Further key points highlighted by the report include:
What is holding back tokenisation
“An underestimation of the importance of the technology in daily business; a certain general hesitance about innovation among the wider European population; the lack of a broader understanding of distributed ledger technologies (DLTs) and blockchain technology both in the public at large and among decision makers; and a diffuse and unclear legal and regulatory framework.”
Opportunities tokenisation offers Europe
“It can become the backbone for a digitalised industry 4.0 across Europe’s economy, merging supply chains, trade finance and logistics into a single seamless process…adopting a token economy in the financial markets would also lead to measurably more efficiency and greater safety, resilience and trust, while considerably reducing costs, complexity and intermediation.” At the Banque de France conference in September 2022, EU Commissioner, Mairead McGuiness, waxed lyrical about blockchain technology and how it:
could cut out the middleman
make transactions more efficient and transparent
record information immutably but be accessible to all those who require it
could allow payments to become cheaper, faster and safer
could potentially unlock the billions of € and $ currently required to cover credit or settlement risk in the financial system.
Development of Europe’s token economy needs
“Engagement from legislators and regulators will be key to create a simple and harmonised legal framework that facilitates innovation and incentivises corporates and citizens to further drive tokenisation while maintaining high standards of security and protection.”
Fortunately, there are signs of such engagement in the fact that we have seen the EU’s securities markets’ regulator publish a report on the distributed ledger technology pilot regime (DLT Pilot). One of its aims is to develop secondary markets for ‘tokenised’ financial instruments.
Impact in the financial sector
“Central banks and other financial institutions should prepare for the tokenisation of assets and put in place the infrastructure. Financial institutions must explore the possibility of introducing programmable money with a focus on overall benefits to the (token) economy.”
Impact of the wider business community
“Large corporates and small and medium-sized enterprises (SMEs) should analyse their current business models to identify opportunities for tokenisation and assess future opportunities that the token economy might create for their business.” Digitisation of Real-Assets’ tokenising traditional financial assets such as investments in businesses, loans, funds, stocks, debt instruments etc.
In a tokenised form, these assets can be traded on a range of regulated digital exchanges and engage in DeFi offerings. Boston Consulting Group estimates the tokenisation of illiquid assets worldwide is potentially worth $16trillion by 2030. BlackRock (biggest asset manager globally) CEO, Larry Fink: “I believe the next generation for markets and next generation for securities will be tokenization of securities.”
Growth in tokenisation of real-assets
Source: CCData
Potential impact on society
“Private citizens will – alongside industry – be the main users of the tokenisation, their demand too can therefore drive companies and governments to adopt and offer relevant solutions”.
Categorisation of digital assets
Source: Roland Berger
Evidence of tokenisation real action
“Irrespective of their general stance on tokenisation: central bank digital currencies (CBDCs) seem to be a topic of singular relevance for a large number of countries and central banks globally. Nine out of ten central banks exploring this option. More than half of all central banks are developing CBDCs or running concrete experiments, and more than two-thirds of them consider it likely or conceivable that they will issue a retail CBDC in the short or medium term.”
Attitude towards tokenisation
Source: Roland Berger
Factors holding back tokenisation
“Tokenisation is seen not as a topic to be addressed urgently, but as a topic to be developed continuously in the long term. Accordingly, top priority is still given to matters that have a palpable and direct financial impact on the individual company and its daily business. Tokenisation therefore rarely appears on the top management agenda of leading companies but is usually found further down in the organisational structure and driven forward in somewhat isolated environments by analysts, experts and technology experts.”
compared to other jurisdictions globally, Europeans are conservative and risk- averse.
lack of education about blockchain and distributed ledger technology.
need for legal and regulatory clarity.
Why should Europe bother with tokenisation?
in principle, tokenisation will strengthen Europe’s sovereignty and make it more competitive by reducing transaction costs through a combination of efficiency gains and better identity and verification solutions. The fast, secure and automated execution of business and financial processes with lower transaction costs enabled by tokenisation, coupled with higher data availability, will generally have a positive influence on economic growth.
it will merge supply chains, trade finance and logistics into one seamless process and will be shaped by the digitalisation of entire production and supply chains, which will be facilitated by connectivity between machines and machine systems and by the introduction of new process control methods (e.g., digital twins).
it has the potential to support all kinds of collaboration between companies and industries.
financial markets would be incentivised by: measurable efficiencies and related cost reductions; increases in security, resilience and trust; less complexity; advances in disintermediation.
the token economy has the potential to cut the cost of cross-border payments, making it easier to raise funds across borders, open up new markets and therefore potentially rally new customers. Furthermore, the introduction of a wholesale stablecoin (or even CBDC) could cut the cost of capital market transactions, eliminate settlement risk and increase efficiency.
new business models and improved business relations could develop by making business processes more transparent.
the successful implementation of smart contracts would enable fractionalised settlement and transfer.
automated processes would scale back the need for intermediaries, resulting in savings on the cost of capital and further savings from automation in cross-border transfers.
The views and thought leadership from august European institutions including BBVA, Commerzbank, Deutsche Bank and Santander, Daimler Trucks, Renault and Repsol offer stimulating and provocative insight. But here are a few examples:
2Tokens, an EU-funded consortium, is helping with education around tokenisation by running a series of master classes. It has recently worked with the Port of Rotterdam to digitise bills of landing, digitisation of share certificates, tokenisation of solar energy and tokenisation of bonds for a leading European bank.
nChain has just taken an equity stake in Gate2Chain. “CEO of nChain Christen Ager-Hanssen told us “Gate2Chain’s suite of solutions is a game-changer, making the tokenisation of real-life assets a reality and enabling better transparency, security, and liquidity. We are thrilled to partner with them in driving the peer-to-peer economy forward. With our shared mission, we are confident that Gate2Chain will play a critical role in transforming the world from Web2 to Web3, and having Gate2Chain onboard with nChain is just the starting point of this exciting journey.”
CodeNekt collects vehicle and driver data, monitoring a vehicle and tracking its maintenance history so removing paperwork and manual processes around MOTs, servicing, vehicle ownership, taxes etc.
Tokenisation of real-world assets using proven protocols (e.g. ERC4363) from firms such as Tokeny, to be then traded on regulated exchanges such as Archax in the UK, Swarm in German and SDX in Switzerland, means that there already exists an infrastructure to create and trade tokenised assets. Nevertheless, there continues to be confusion that tokenised assets and crypto are the same, but this is not the case.
Tokenisation of real-world assets are typically governed by existing security regulations as, in essence, tokenisation is merely enabling investors access to assets in a digitised manner. Meanwhile, the legislation of cryptos is being addressed with the role out of Market in Crypto Assets (MiCA) in the EU which will hopefully provide both regulatory and greater clarity, which is much required. So, the question companies need to ask is: Are they equipped to understand how tokenisation may impact their business, staff and customers?
Written by Jonny Fry CEO Team Blockchain Ltd and an advisor for a number of firms as well, Chairman of Gemini Capital UK and he is regulated by the Central Bank of Ireland. Editor of Digital Bytes, (https://digitalbytes.substack.com/ ) a weekly analysis of how, why, and where Blockchain Technology and Digital Assets are used in different industries and jurisdictions globally
