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Institutional Crypto Terms | FinTech Rising

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“It’s the tokenization of the asset that’s the revolution,” said Dave Birch, director of innovation, Consult Hyperion, a London-area consultancy that specializes in secure transactions. Birch interviewed corporate venture-capital manager Jonathan Larsen at Money20/20 Asia.

“Tokenization is a really massive trend,” Larsen said. “That’s a much bigger story that cryptocurrencies, initial coin offerings (ICOs), and even blockchain.”

Larsen is chief innovation officer of Ping An Group and head of the Ping An Global Voyager Fund. Ping An is a Chinese financial-services holding group based in Shenzhen.

“I have no doubt about the opportunities (of tokenization) to reduce friction across every asset class and to create fractionalization of assets where it does not exist today,” he said. Fractionalization refers to the ability to, for instance, partition the equity you own in a home and use the resulting token to sell that equity as a tradable asset.

“That means if you own a home and if you could use tokens to express the equity in your home, you could sell that equity or use it as collateral in a much easier way than our current paper-based processes,” Larsen explained. As another example, aggregate insurance risks could also be traded more easily and broadly than through the traditional reinsurance companies that cover those risks for insurers.

“We can create transparency and universal access and the ability to reduce frictional costs,” Larsen said. “Tokenization is at the core.”

“It leads to more efficient and liquid markets,” Birch said.

Asset-backed crypto-tokens The difference to understand between tokens and ICOs is that tokens are based on verifiable assets. ICOs are the sale of tokens representing an ownership stake in a firm or application—investment offerings for all practical purposes and likely to be regulated as such by U.S. securities regulators.

“ICOs are tokens minus the assets,” quipped Larsen. “Where we are going is tokens with assets and solving the problems of friction (in markets). . . . ICOs are the training wheels for the token economy.”

From Institutional Crypto Terms | FinTech Rising.

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