The Challenges of Tokenisation

A process which transforms rights to a tradable asset into a digital token that is depicted and administered in the blockchain or some type of distributed ledger is called tokenisation. Tokenised assets are also known as digital assets or crypto-assets.

Asset tokenisation not just enables digitisation of an asset but also to fractionalise it’s worth so that an arbitrary amount of (sub-)tokens, acting as shares, can be bought, traded and settled in the blockchain. This is also termed as fractional ownership, and it permits independent investors to produce, purchase or sell shares from any worthy asset, comprising of conventionally illiquid ones like real estate, transportation, pharmaceuticals, agriculture etc.

Real Challenges of Tokenisation

Asset tokenization is highly revolutionary in its type and image. From the view of digital assets, their legal terminology, to the manner they are formed, guarded and administered, recognising the adoption of digital assets is based completely on the potential of the economic characteristics to reorient standard criteria, operational structures and provisions. Or in other words, institutionalisation.

Regardless of a rapidly growing interest in digital assets, brokers, custodians and government authorities then too access asset tokenization with vigilance and precautionary measures. Let’s take a look at some of the potential reasons behind doing so –

Regulatory Uncertainty

The lack of common regulations among jurisdictions, in association with the boundless nature of the blockchain technology place a challenge for institutions and investors to adopt digital assets confidentially. To conquer this challenge, local and global policymakers, regulators and the financial sector (inclusive of technology providers) should work in sync to specify the legal framework that entails all apt facets of the digital asset management from laws, regulations, compliance, tax implications or accounting to financial reporting, etc.

  • Code of Conduct Uncertainty

The lack of common standards and code of conduct for the creation and management of digital assets; not only for financial entities to mediate the business architecture but also reveals investors to potential unnecessary tax levies. Applying formal frameworks (governance, information barriers) enable the establishment of trust to all market participants.

  • Institutional-level Digital Asset Management

Having an extensive, strong and steadfast digital asset management platform to handle digital assets, which offers premium-grade safety against cyber and physical crime as well as similar levels of performance versus traditional asset systems; is crucial to determine robust foundations for the tokenised economy. Additionally, those platforms must work in tandem with the existing systems to guarantee a seamless onboarding and management of the assets.

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Is your Business Blockchain Ready?

Prior to racing to adopt blockchain, every CEO must be able to answer two fundamental questions –

‘How can my industry and company utilise blockchain?’

And, ‘should I be the first proposer — or should I supervise, organise, and then be involved?’

In its true essence, blockchain is a technology which creates a transparent and secured record of transactions, allows multiple parties have a single source of reference / data in near-real time, and permits you to govern access to the data, making it almost impossible to alter the historical record. How can you capitalise on it? The answer is to treat it like any other business decision: determine the problem or opportunity it can address; take into account whether it is a strategic precedence for you; understand if there is a competitive benefit to using blockchain first, instead of other alternatives; and calculate its return on investment.

Blockchain is a technology, not a result, and effectively enforcing a solution with blockchain is less about technology competence and more about an organisation’s capability to work with other organisations and make new business structures. Blockchain should be used to handle opportunities and issues which the absence of insufficient and simpler answers.

Read About: Labuan Credit Token License

Labuan Credit Token License

Labuan IBFC is ideal for credit token business where a token; in the form of a cheque, card, voucher, stamp, booklet, coupon, or other forms of document; is offered or issued to consumers by the issuer. Labuan IBFC, amongst its vast offerings in financial services licenses; also offers credit token license for companies seeking to venture into the digital space specifically associating to blockchain-based businesses. In regard to digital tokens, Labuan credit token companies can create blockchain ecosystem to support the use of digital assets by users. This could be in respect to real estate investments or for buying of goods and services offered by participating merchants.

An Interesting Read: The Ultimate Guide to Cryptocurrency Exchange Tax in Malaysia

Key advantages of operating out of Labuan comprises of 100% foreign ownership control, 3% corporate tax, confidentiality of ownership and domiciled in a well-regulated, stable and sustainable legal and tax framework. To understand about Tokenisation and obtaining a license for Credit Token in Labuan, contact QX Trust team of consultants at CONTACT US or