The tokenization of real assets promises to revolutionize investment strategies through improved liquidity, transparency and fractional ownership. Jan van Eck, CEO of global investment management firm VanEck, recently shared his thoughts on the major challenges hindering this innovative process.
Barriers to tokenization
The tokenization of assets such as real estate, art or commodities could radically transform investment methods. However, two major obstacles need to be overcome to realize its full potential.
The first major challenge is liquidity. The key question is who will provide the necessary liquidity. Tokenization theoretically enables the rights to an asset to be converted into a digital token on a blockchain, but the presence of a buyer and a seller is not enough. A market must be created and maintained, requiring sophisticated and profitable market-making mechanisms. This necessity raises the question of who can and will take on this role, particularly for hard-to-value assets.
The second obstacle is the regulatory landscape. Currently, there is no clear framework for establishing a market for tokenized assets without encountering significant regulatory challenges. In the US, the complex regulatory environment makes it difficult to establish such markets. However, Europe, with its large retail market and a more welcoming regulatory framework for crypto investment and trading, appears to be a more viable candidate for the development of tokenized assets.
Europe: A clearer horizon for tokenization
Europe's regulatory approach to cryptocurrency and blockchain technology has been more progressive than that of the United States. The EU is actively working on a comprehensive framework for crypto assets, known as MiCA (Markets in Crypto-Assets), aimed at harmonizing regulations across member states and fostering innovation while ensuring investor protection.
The prospects for the tokenization of real assets are vast, but liquidity and regulatory challenges need to be addressed. Europe seems to be at the forefront of this revolution, offering more fertile ground for innovation thanks to a more welcoming regulatory framework.
