Tokenization market grows as Taurus integrates with Polygon
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(Kitco News) - As banks and institutional investors look for ways to integrate blockchain technology and asset tokenization into their operations, Taurus – a Swiss cryptocurrency infrastructure firm – is looking to facilitate the process through its integration with the Polygon network.
According to a report from Decrypt on Friday, Taurus has integrated with the high throughput layer-two network as a way to allow banks to “issue, book, and service” tokenized assets, creating another link between the crypto ecosystem and the European banking system, which is in need of modernization.
“Building on Polygon [...] is a natural step for Taurus,” said Taurus CMO Victor Busson. “Our banking, consumer goods, and sports and entertainment clients can now benefit from low fees and faster transactions for any tokenization use cases: equity, debt, structured products, funds, NFTs.”
While the financial sector’s interest in blockchain technology is growing, multiple barriers – including regulatory uncertainty and the high cost of on-chain transactions – have hampered engagement and limited its integration with banks and other financial institutions.
According to Taurus, most tier-1 financial institutions have already expressed a high level of interest in issuing tokenized securities and are looking for a reliable “blockchain-agnostic and token-agnostic infrastructure.”
Polygon, which operates on the Ethereum network and benefits from the security it provides, offers a low-fee alternative to both the Ethereum network and the SWIFT settlement system and has a growing decentralized finance (DeFi) and non-fungible token (NFT) community.
Taurus confirmed by email that 70% of its clients – which includes the likes of Arab Bank Switzerland, Credit Suisse, and Deutsche Bank – already use its tokenization capabilities, and interest continues to grow.
“By embracing digital securities, financial institutions and issuers can make non-bankable assets bankable: concretely issue, transfer, and trade securities in an automated way by leveraging smart contract capabilities,” the company said. “This includes programming the behavior of securities including “dividend payments, coupon payments, stock splits, [and] compliance rules.”
The tokenization of real-world assets is a “no-brainer,” said Colin Butler, Polygon’s Global head of Institutional Capital. “The challenge is and always has been to build sufficiently advanced infrastructure to enable it,” he said, adding that the Taurus partnership will “create the foundation for robust opportunities in the tokenization space.”
|Swiss bank Cité Gestion is the first private bank to tokenize its shares|
Tokenization has moved into the mainstream over the past year as institutions from BlackRock to Franklin Templeton have begun to engage in the practice.
In December, Larry Fink, the CEO of BlackRock, said the future for global markets will be tokenization, which will be the driving force behind the next evolution in investing, similar to how exchange-traded funds (ETF) have altered the investing landscape over the past 30 years.
“I believe the next generation for markets, the next generation for securities, will be tokenization of securities,” Fink said. “Think about instantaneous settlement [of] bonds and stocks, no middlemen, we’re going to bring down fees even more dramatically,” he explained.
A report released by Citi in March suggested that “tokenization of financial and real-world assets could be the ‘killer use-case’ blockchain needs to drive a breakthrough,” and predicted that tokenized securities are set to reach over four times the size of today’s total cryptocurrency market within the next seven years.
“We forecast $4 trillion to $5 trillion of tokenized digital securities and $1 trillion of distributed ledger technology (DLT)-based trade finance volumes by 2030,” the Money, Tokens and Games report said. The bank estimates that $1.9 trillion of the up to $5 trillion will be tokenized debt, $1.5 trillion will be real estate, $700 million will represent venture capital and private equity, and between $500 million and $1 trillion will be tokenized securities like stocks.
As Franklin Templeton showed with the integration of its Nasdaq-listed OnChain U.S. Government Money Fund (FOBXX) with the Stellar (XLM) and Polygon networks earlier this year, the process of tokenization is already underway and is likely to pick up steam as greater regulatory clarity starts to emerge with the passage of legislation like the EU’s Markets in Crypto-Assets bill, which was signed into law on Wednesday.