The FED’s abstract:
“In this paper we outline tokenization, which is a new and rapidly growing financial innovation in crypto asset markets, and we discuss potential benefits and financial stability implications. Tokenization refers to the process of constructing digital representations (crypto tokens) for non-crypto assets (reference assets). As we discuss below, tokenizations create interconnections between the digital asset ecosystem and the traditional financial system. At sufficient scale, tokenized assets could transmit volatility from crypto asset markets to the markets for the crypto token’s reference assets.”
Our Conclusion From The Article:
“Tokenization is a promising financial innovation with the potential to reshape the landscape of asset ownership and trading. While it offers numerous benefits, it’s essential to be aware of the financial stability implications as the market for tokenized assets grows.”
Specific examples of tokenization:
- Agricultural Commodities: Tokens like SOYA, CORA, and WHEA represent soybeans, corn, and wheat respectively. These were launched in Argentina by a joint venture between Santander and Agrotoken.
- Gold: Tokenized gold has a market capitalization of approximately $1 billion as of May 2023. Dominant coins in this market include Pax Gold (PAXG) and Tether Gold (XAUt).
- Real Estate: Real Token Inc. (RealT) tokenizes legal rights on residential properties. Each property is owned by a separate LLC, and the membership interests in these LLCs are tokenized.
- Financial Assets: Tokenized versions of stocks, bonds, and ETFs exist. For instance, tokenized stocks of companies like Amazon, Tesla, and Apple have been traded on crypto exchanges.
They also detail some of the tokenization project currently on the market…
List of Tokenized project:
- Digital Bonds Issued by the European Investment Bank
- J.P. Morgan’s Onyx Platform
- Franklin Templeton’s Tokenized Money
- Ondo Finance
- Paxos Trust
- TG Commodities Limited
- Toucan Protocol
Amongst this list is a project called Lofty that is built using Algorands DLT..
What is Lofty:
From the FED’s article:
“Lofty is a platform that provides the ability to fractionally own U.S. rental properties through the Algorand blockchain. They operate very similarly to RealT where properties are transferred from sellers to Lofty by placing each property under an independent LLC and membership shares of the LLC are tokenized. The returns from holding these tokens come from rental income and property appreciation. It is unlikely that there would be an option to redeem as the reference asset is a legal claim to the returns generated by the token, not the property itself.”Loft is currently ranked number 2 in terms of TVL by defi lama on Algorand:
It’s nice to see a Algorand defi project being mentioned by the likes of the federal reserve board! Algorand has suffered at the hands of the SEC and Gary Gensler loosely calling it a security under the Coinbase and Binance lawsuits. A lack of regulatory clarity is stalling the crypto space, perhaps purposefully or perhaps ignorantly! Algorand have any partnerships with large financial and SME’s that right now are likely unable to fully dive into the depths of these partnerships due to regulatory fears! The fact that the federal reserve mentions a algorand defi project could be seen as a possitive sign. We will keep you updated here at allincrypto.com
Thank you for taking the time to read this article!