Tokenisation: A Future-Ready Solution for Financial Markets, Says Bitfinex

Bitfinex
has
recently
asserted
that
tokenisation
is
not
a
threat
but
rather
a
necessary
evolution
for
traditional
financial
markets,
according
to
a
comprehensive
article
on
their
blog.
This
statement
comes
in
response
to
skepticism
from
segments
of
the
traditional
financial
sector.

Tokenisation
and
its
Critics

The
debate
over
tokenisation
has
intensified
following
an
opinion
piece
by
the

Financial
Times
that
voiced
concerns
about
the
integration
of
public-permissionless
blockchains
in
real-world
asset
(RWA)
tokenisation.
The
article
suggested
that
existing
markets
are
already
efficient
enough
and
that
blockchain
technology
might
introduce
unnecessary
complexities.

Bitfinex
counters
this
viewpoint
by
emphasizing
the
transformative
potential
of
blockchain
technology,
arguing
that
it
can
modernize
outdated
financial
systems.
They
highlight
that
no
technological
system
is
perfect,
including
the
existing
financial
infrastructure,
which
they
describe
as
cumbersome
and
in
need
of
innovation.

Blockchain
vs.
Crypto

One
of
the
key
points
Bitfinex
makes
is
the
distinction
between
blockchain
technology
and
cryptocurrencies.
While
crypto
assets
are
known
for
their
volatility,
blockchain
technology
itself
offers
significant
benefits
such
as
enhanced
transparency,
security,
and
the
elimination
of
intermediaries
in
financial
transactions.

Bitfinex
points
to
the

Liquid
Network
as
an
example
of
how
blockchain
can
be
used
to
improve
financial
transactions.
This
Bitcoin
sidechain
allows
for
encrypted
transactions,
ensuring
that
details
are
only
visible
to
involved
parties,
thus
maintaining
privacy
while
providing
security.

Future-Proofing
Capital
Markets

Traditional
capital
markets
have
been
slow
to
adopt
internet-era
technological
changes,
according
to
Bitfinex.
They
argue
that
tokenisation
can
bring
real-time
settlement,
24/7
trading,
and
the
ability
to
self-custody
assets,
which
are
significant
improvements
over
the
current
system
that
relies
on
delayed
settlements
and
limited
trading
hours.

With
the
recent
shift
to
T+1
settlement
cycles
in
the
US,
Canada,
and
Mexico,
the
need
for
faster
and
more
efficient
financial
infrastructure
is
more
pressing
than
ever.
Bitfinex
notes
that
even
Swift,
a
symbol
of
traditional
finance,
is
experimenting
with
blockchain
technology,
indicating
its
growing
acceptance.

Financial
Inclusion

Beyond
efficiency,
Bitfinex
highlights
the
potential
of
tokenisation
to
enhance
financial
inclusion,
especially
in
developing
countries.
Traditional
capital
markets
often
overlook
smaller
businesses
in
emerging
markets
due
to
high
costs
and
limited
access
to
capital.
Tokenisation
can
bypass
traditional
financial
intermediaries,
allowing
these
businesses
to
raise
capital
more
easily
and
at
a
lower
cost.

Embracing
Innovation

Bitfinex
concludes
that
global
capital
markets
are
at
a
crossroads.
The
choice
is
between
sticking
with
legacy
systems
or
embracing
blockchain
technology
to
unlock
new
opportunities.
They
argue
that
permissionless
public
blockchains
can
offer
the
scalability,
efficiency,
and
privacy
controls
needed
to
fully
leverage
the
benefits
of
tokenisation.

The
status
quo
bias,
as
exemplified
by
the
Financial
Times
article,
risks
stifling
much-needed
innovation.
Bitfinex
urges
financial
markets,
regulators,
and
policymakers
to
embrace
new
technologies
as
they
pave
the
way
for
the
future
of
finance.

Image
source:
Shutterstock