Asset Tokenisation: What It Is and Why It Matters
Originally published . Updated .
Owning part of a luxury hotel, a painting or a share of a company like Amazon used to take millions of dollars and specialist access. Asset tokenisation is changing that.
Our Digital Innovation Fund gives clients access to this part of the market. Here is what tokenisation is, why it matters and how it works.
What tokenisation is
A share is a slice of ownership in a company. Tokenisation goes a step further: it divides an asset into digital tokens, each one a small unit of ownership that can be bought or sold on its own.
The tokens are recorded on a blockchain, a shared digital ledger that tracks every transaction. The blockchain shows who owns each token, makes the record very hard to alter, and makes ownership simple to transfer.
What it changes
More people can invest. Luxury property and private equity have traditionally been open only to the very wealthy. Tokenisation allows smaller investments, so more investors can take part.
Lower costs and faster settlement. Tokenisation removes intermediaries such as brokers and clearing houses, which cuts fees. Transactions settle almost instantly, where traditional systems can take days.
Clear ownership. Each token is recorded on the blockchain, so the ownership record is visible and difficult to tamper with.
Tokenised investments today
Tokenisation already reaches well beyond shares:
Bonds. Governments and companies use tokenisation to cut costs and speed up trading. The European Investment Bank has issued tokenised bonds worth billions of dollars, and local governments such as Quincy, Massachusetts, are exploring blockchain for municipal bonds.
Property. Investors can own a fraction of a property, such as a hotel or a commercial portfolio, without millions of dollars or tenants to manage. AspenCoin, for example, let investors buy tokens representing ownership in the St. Regis Aspen Resort.
Gold and commodities. Tokens such as Tether Gold and Paxos Gold represent small amounts of physical gold held in vaults. Silver and oil are following.
Art and collectibles. A Banksy or a Monet can be tokenised so several people own part of the work. Platforms like Masterworks use this model to open art investing to more people.
Private equity. Private equity has traditionally required millions to invest. Hamilton Lane has created tokenised feeder funds with minimum investments as low as US$1 000.
Music royalties. Artists can sell tokens that pay holders a share of the royalties from a song or album.
Farmland. Investors can buy small portions of agricultural land, with returns tied to crop yields or land value.
How the blockchain works
A blockchain records every transaction in order, in a ledger that anyone can check and no single party can change.
Each token is an entry in that ledger, showing your ownership. Smart contracts, which are agreements written in code, handle tasks such as transferring ownership or paying dividends automatically. That automation makes tokenised assets quicker and simpler to administer than traditional ones.
The Digital Innovation Fund
We launched the Digital Innovation Fund to give clients access to this market:
Access to high-value assets such as property, private equity and commodities that were previously out of reach.
Flexibility: tokens can be bought, sold and traded easily, often with lower minimums than traditional investments.
Professional management: our investment team researches and manages the fund's holdings.
Where this is heading
Adoption is accelerating. Governments are piloting blockchain-based property registers, and asset managers such as BlackRock have launched tokenised money market funds. Over time, tokenisation is likely to become a standard way to hold and trade assets, and the range of opportunities will grow with it.
Tokenisation makes investing more accessible and more efficient, from owning part of a skyscraper to reaching new markets. The Digital Innovation Fund is how our clients take part.
Digital assets are highly volatile and are not suitable for all investors. Past performance is not indicative of future performance.