The process of converting financial assets such as stocks, deposits, and loans into 'tokens' has emerged as a key task in the financial industry. Tokens are electronic certificates that enhance reliability using blockchain technology, such as that used by Bitcoin.
According to the financial investment industry on the 1st, the Korea Institute of Finance noted in a recent report titled 'Expectations and Future Challenges of Financial Asset Tokenization' that "the global transaction volume of physical asset tokens reached $19.92 billion (approximately 28.36 trillion won) as of the end of March this year."
Physical asset tokens are tokens that represent real-world assets such as bonds, commercial papers, money market funds, real estate investment trusts, real estate, precious metals, and artworks. In South Korea, token securities have commonly been known as a secondary means for investments in exotic assets like artworks or music sources, but physical asset tokens include the conversion of existing financial products into tokens, thus their scope is very broad.
The Korea Institute of Finance explained that physical asset tokens have significant advantages, such as improving the speed and efficiency of transactions and reducing transaction costs. Since tokens are electronic certificates, they can execute automatic transactions through programming, and thanks to the characteristics of blockchain, stable trading is possible without central management institutions or intermediaries, allowing for savings on fees.
However, the risks are considerable. Differences in repayment periods or prices between tokens and their underlying 'reference assets' can lead to market confusion. Additionally, the need for financial institutions to secure large short-term liquidity (excess funds) to mitigate the risks of real-time payments through blockchain is a burden.
The Korea Institute of Finance stated, "Despite various risk factors, the tokenization of financial assets is a challenge that financial institutions and financial infrastructure providers must actively address in terms of improving the efficiency of financial transactions and enhancing market competitiveness."