BlackRock has joined a growing list of companies that support the tokenization of securities, despite the CEO’s general skepticism regarding the industry.
The next generation of markets and securities, according to BlackRock CEO Larry Fink, “will be tokenization of securities.”
What Tokenization Will Do For Markets
Tokenization, in the context of blockchain technology, is the process of creating a digital representation of an asset on a blockchain and validating its ownership and transaction history.
This approach provides a different way to exchange assets like stocks, bonds, real estate, or even alternative assets like land, wine, or art, allowing the transfers to be viewable on a public ledger.
Tokenization will offer “instantaneous settlement” and “lower fees,” according to Fink, who spoke at a New York Times DealBook event. He went on to say that despite these benefits, the growth of this kind of technology wouldn’t affect BlackRock’s business strategy.
Along with discussing the potential of blockchain, the CEO also touched on a number of current economic concerns, such as the impact of the Russia-Ukraine conflict, China’s evolving role, and the pressure from global inflation that has affected most developed nations this year.
More Companies Joining the Tokenization Bandwagon
BlackRock is certainly not the only company banking on tokenization as the direction of financial services, though.
Leading investors including a16z, General Catalyst, and Samsung Venture Investment recently invested $70 million in Flowcarbon, a start-up tokenizing carbon credits helmed by former WeWork founder Adam Neumann.
JPMorgan turned to Polygon in November to trade tokenized cash deposits in a Singapore-based pilot using Onyx Digital Assets, a private blockchain developed by the bank.
Despite having a positive outlook on tokenization, the BlackRock CEO stated that he thinks the majority of businesses connected to cryptocurrencies “are not going to be around” in the future, however, he did state that blockchain technology will be extremely essential.
Commenting on the FTX scandal which has dominated the cryptocurrency market for the past month, he claimed that the FTX’s fatal flaw was developing its own coin.
Following news of significant cross-pollination between FTX and its sibling hedge fund Alameda Research, Binance sold off a sizable amount of its enormous stock of FTX’s FTT token at the beginning of this month. This was one of the early catalysts for the FTX implosion.
Fink clarified that the value of his firm’s investment in the collapsed exchange was $24 million though the investment was held in a subsidiary “fund of funds” and not in the “main part” of BlackRock’s operation.
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