Taking advantage of tokenisation: A corporate roadmap for 2024
A quick guide outlining what business leaders and corporates need to know to understand and effectively leverage the new advances in tokenisation.
Tokenisation, the process of digitally representing assets or items of value through a smart contract on a blockchain, is now rapidly maturing, and robust and scalable solutions are on the horizon. In this quick guide, Steven Hu, Standard Chartered’s Head of Digital Assets, Trade and Working Capital, outlines what business leaders need to know to understand and effectively leverage the new advances.
The stage is being set by regulatory alignment and market evolution. Get ready for tokenisation to go mainstream.
Regulators across major markets are joining forces to catalyse adoption. Following two years of industry pilots under the Monetary Authority of Singapore’s Project Guardian, representatives from the IMF, Japan’s Financial Services Agency, the UK’s Financial Conduct Authority and the Swiss Financial Market Supervisory Authority are now participating in a policymaker group to drive regulatory alignment.
Meanwhile, guidance published by bodies including Hong Kong’s Securities and Futures Commission is injecting clarity around the application of this transformative technology to financial assets – an important enabler of the development of a tokenised economy.
In parallel to government-led moves, a surge in tokenisation platforms and marketplaces is providing new avenues for investors to access a diverse range of asset classes, while a growing number of trading venues are paving the way for greater liquidity flows.
The pace of change is accelerating, and with it, the opportunity for corporates to be at the forefront of the tokenisation wave.
Transforming financial assets into digital tokens can be a game-changer for efficiency and liquidity. Identify your use case and evaluate its applicability.
A key component of tokenisation is the use of smart contracts, which enable automated processes. These contracts can automatically execute transactions based on predefined criteria, reducing the need for manual intervention and minimising errors. This automation is especially beneficial in complex, multi-party financial operations, where precision and timeliness are critical.
Current pilot projects in tokenisation show promising results, offering corporate treasurers and finance leaders solutions to several immediate challenges, from optimising treasury functions and diversifying funding opportunities to injecting financial strength into supply chains.
Tokenisation can streamline cross-border transactions, enabling faster settlements, multi-currency clearing and reduced costs by minimising intermediary involvement. It also provides benefits in optimising working capital management. By converting assets into digital tokens, corporates will be able to trade more fluidly, accessing funds quicker and enhancing liquidity.
Tokenising assets like payables and receivables could improve access to financing while creating more resilience and robustness in the deep tiers of the supply chain.
Tokenisation can also diversify funding opportunities for corporates. It opens up new avenues for alternative assets such as trade finance, reducing the friction associated with managing diverse portfolios and introducing innovative funding mechanisms. Leveraging custodian banks and other asset aggregators to drive tokenisation at scale presents an opportunity for corporates to have a wider range of their assets tokenised simultaneously through a single relationship.
As the landscape matures and diversifies, a growing number of viable use cases is emerging. Corporates should actively collaborate with their banking partners to explore and harness the burgeoning possibilities of the technology, while rigorously evaluating its applicability and developing a clear business case tailored to their unique operations.
Progress on standards and interoperability is crucial for global scalability. Participate to shape the future.
The digital assets landscape is still relatively nascent. Regulatory clarity and a need for consistent frameworks present a complex terrain for corporates. A pragmatic approach is to forge partnerships with banks to leverage their regulatory expertise and connections. Banks can serve as a valuable partner, helping corporates understand and adapt to evolving regulations. Through joint pilot projects, corporates can explore tokenisation in a controlled environment, gaining first-hand insights while mitigating risks.
Corporates engaging early with banking partners in tokenisation pilot initiatives can also gain first-mover advantages. These include leading the way in adopting new financial technologies, shaping the development of regulatory frameworks, and setting industry standards. Participating in pilots and proofs of concept to test out new technologies like CBDCs and digital currencies could help corporates understand emerging trends and identify potential applications. For example, by tapping into Project Guardian’s network of banks, startups and technology providers, corporates can explore innovative finance solutions and stay ahead of the curve on digital transformation in financial services.
Early involvement also allows corporates to tailor innovative solutions to their specific needs, potentially gaining a competitive edge in efficiency and market positioning. Additionally, these early adopters can play a role in collaborating with banks and regulators to shape standards and guidelines, ensuring their needs are represented and new systems are optimised for their use cases.
Standard Chartered is leading the way in tokenisation. Discover how we can guide your journey.
Digital assets are set to become an important part of the future of financial services. Standard Chartered is at the forefront of tokenisation, actively engaging in its development and offering tailored support to help clients adapt to and leverage this emerging technology.
We continue to work with governments, central banks and regulators to help shape the future universe of digital assets, and with our clients to understand what the future might look like, what opportunities it will create, and how they can best take advantage of them.
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