Tokenization: The Revolutionary Change Agent in Global Trade

Tokenization is becoming a transformative force in global trade, bringing unprecedented liquidity, divisibility, and accessibility to investors. It not only offers investors new opportunities to balance their portfolios with digital tokens backed by real value, but also helps to bridge the $2.5 trillion trade finance gap worldwide.

1. The Development of Tokenization

The origin of tokenization can be traced back to the early 1990s with Real Estate Investment Trusts ( REITs ) and Exchange-Traded Funds ( ETFs ). The birth of Bitcoin in 2009 and the launch of Ethereum in 2015 laid the foundation for the creation of tokens representing various assets. Subsequently, new phenomena such as Initial Exchange Offerings ( IEO ), Initial Coin Offerings ( ICO ), and Security Token Offerings ( STO ) emerged.

Currently, the financial services industry is actively exploring the potential of tokenization. A typical example is the Project Guardian led by the Monetary Authority of Singapore (MAS), which aims to test the feasibility of asset tokenization and decentralized finance (DeFi) applications.

2. Driving Factors of Tokenization

1. Financing needs of small and medium-sized enterprises: The global trade financing gap has reached $2.5 trillion, providing huge opportunities for investors.

2. Attractive but underinvested markets: Trade finance assets have characteristics such as low default risk and high recovery rates, but institutional investors are underinvesting in such assets due to reasons like lack of understanding and transparency.

3. Regulatory pressure from banks: The implementation of Basel IV will drive banks to optimize their balance sheets through tokenization and other means.

4. Increase in Investor Demand: By 2024, 69% of buying companies plan to invest in tokenized assets, up from 10% in 2023.

Three, the Four Major Advantages of Tokenization

1. Improve market access: Open the door for a broader group of investors to invest in emerging markets.

2. Simplifying Trade Complexity: Streamlining trade processes and supply chain financing through digital trade tokens and smart contracts.

3. Digital tokenization: Expand the range of investable assets and improve trading efficiency.

4. Reduce information asymmetry: enhance transparency and provide more data access.

4. How to Participate in the Tokenization Market

1. Adoption: Investors should start with education and pilot projects to build confidence in tokenization asset allocation.

2. Collaboration: Industry participants should collaborate to develop shared infrastructure to achieve interoperability and efficiency.

3. Promotion: Governments and regulatory bodies should develop a balanced policy framework to promote the responsible development of the industry.

Tokenization is at a turning point of widespread acceptance. Collaborative efforts across the industry are crucial for realizing the benefits of tokenization. Through joint efforts, tokenization is expected to fundamentally change the global trade landscape, creating new opportunities for investors and businesses.