BofA calls the tokenization of traditional assets key to digital adoption
Bank of America calls the tokenization of traditional assets key to digital adoption
The market capitalization of tokenized gold has already surpassed $1 billion, and the digitalization of real asset rights continues to gain momentum
Bank of America (BofA) sees tokenization of traditional assets such as commodities, currencies, and stocks as "key to digital asset adoption," CoinDesk writes, citing a bank analyst report.
Tokenization is the translation of certain rights into the token form on a blockchain. The digital form of ownership of tangible assets, such as precious metals, allows those assets to be traded and stored without the involvement of traditional intermediaries.
The digitalization of tangible assets is gaining momentum, with the market capitalization of tokenized gold already surpassing $1 billion in March, according to a Bank of America report.
Previously, investors who wanted to enter the gold market could buy units of exchange-traded funds (ETFs) and futures, while those who wanted access to physical gold bought the metal itself through dealers. But these investment instruments "have shortcomings related to their cost and/or liquidity," the analysts wrote.
BoFA notes that tokenized gold provides access to physical gold, 24-hour real-time settlement, no intermediary fees, and no storage and insurance costs. A low threshold for investment increases the product's accessibility, while fractionation (fractional representation of the asset) allows ownership of physical gold to be transferred, which was previously impossible, analysts explain.
Tokenization of the precious metal can increase liquidity and allow investors to balance portfolios quickly and efficiently, the report said.