DTCC Digital Belongings international head and managing director Nadine Chakar made a compelling case for the advantages of tokenization in her testimony earlier than the Home Monetary Providers Subcommittee on Digital Belongings on June 5.
Chakar’s testimony centered on the transformative potential of tokenizing real-world property and its implications for the US monetary markets.
She highlighted DTCC’s pivotal position in modernizing the monetary {industry} by digital securities and tokenization options. The agency has been a cornerstone of monetary market infrastructure for over 50 years, processing a staggering $3.0 quadrillion in securities transactions in 2023 alone.
She instructed lawmakers:
“Tokenization represents a pure evolution in our efforts to simplify advanced monetary processes and improve market efficiency.”
Tokenization advantages
In her detailed testimony, Chakar outlined the numerous benefits of tokenization in processing and managing the lifecycle of monetary property, resembling tokenized securities.
Chakar defined that tokenization converts rights or asset possession models into digital tokens on a blockchain, probably revolutionizing the processing of conventional monetary property.
She highlighted two main sorts of tokenization: Digital Twin Tokens and Safety Tokens — each aiming to streamline transactions, scale back prices, and broaden investor entry.
She stated:
“Tokenization provides elevated effectivity and decrease prices by enabling swifter and extra environment friendly transactions, decreasing processing inefficiencies, and higher managing reconciliation.”
Chakar additionally famous that tokenization might increase the investor base by making property extra accessible by elevated automation and better information availability.
Challenges
Regardless of the promising developments, Chakar acknowledged the challenges of integrating DLT into current monetary programs.
She burdened the necessity for industry-wide coordination, standardization, and strong regulatory frameworks to deal with safety dangers, compliance concerns, and interoperability points.
In accordance with Chakar:
“Transitioning to a DLT-based monetary system might be a monumental process. It requires concerted efforts from the whole monetary ecosystem, together with regulatory our bodies, to ascertain a safe and resilient digital property infrastructure.”
Chakar urged lawmakers to align tokenization rules with current monetary frameworks, advocating for the “similar exercise, similar threat, similar regulation” precept.
She additionally known as for additional research on guaranteeing the authorized enforceability of tokenized property, operational resiliency, and applicable therapy beneath insolvency regimes.