Banks are exploring various applications of asset tokenization on the blockchain in search of greater efficiency, transparency, security and liquidity.
Asset tokenization is one of the most explored use cases of blockchain technology today.
Some of the world's largest banks, such as the European Investment Bank (EIB) and the World Bank, are exploring the benefits of tokenizing assets on the blockchain for both issuers and investors.
The EIB is one of the first banking institutions in the traditional system to have implemented blockchain to tokenize its financial assets. The institution is using blockchain to facilitate the efficient issuance, negotiation and settlement of bonds.
Other major banks, such as BBVA, Banco Santander, Goldman Sachs and Société Générale, are also implementing blockchain to tokenize their services.
Tokenization of bonds on blockchain
Blockchain technology is a distributed ledger that enables the secure and immutable record of transactions and tangible and intangible assets. Thanks to its characteristics, this technology can guarantee a high level of transparency, security, trust and efficiency, which is why companies around the world, including banks and financial institutions, are interested in implementing it.
In the case of banks, blockchain can help these institutions to issue assets more efficiently, reducing issuance times and costs, increasing transparency, ensuring security and opening doors to new markets.
In a post on LinkedIn, Fyr Legal's technology contracting lawyer, Ignacio Muñoz, highlighted that asset tokenization also allows banks to reduce the need for intermediaries, which further enhances efficiency and improves the speed of settlements.
World Bank explores tokenization of infrastructure projects
But in addition to tokenizing financial services such as bonds, banks are also exploring new applications and use cases for blockchain tokenization.
In a report published by the World Bank recently, the entity reported on the use of tokenization for infrastructure projects. In said report, titled “Infrastructure Tokenization: Does blockchain have a role in the financing of infrastructure?”, the World Bank reveals that it has been using blockchain to close the financing gap that exists in the infrastructure industries, Optimizing financing processes and access to capital for the construction of roads, renewable energy systems and power plants.
Through tokenization, the World Bank is exploring how blockchain technology can improve the efficiency, transparency and sustainability of investments in key sectors such as transport and energy.
The World Bank started implementing blockchain technology in 2018 for the issuance of a green bond. Also, the International Finance Corporation and Banco Santander launched blockchain tokenized bonds in 2019. Separately, the EIB has launched three tokenized bonds using the blockchain platform developed by Société Générale for its first bond issuance and Goldman Sachs’ DAP and HSBC’s Orion solutions for the second and third issuance of its bonds, respectively.
These use cases demonstrate the potential of asset tokenization to transform financial markets and other industries, creating new opportunities for all their participants.
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