By Alex Lola
Chief Executive Officer, ATME
In recent years, the lines between traditional finance and modern technologies have blurred, creating a convergence that is reshaping capital markets with better efficiency and accessibility.
As conventional systems align with digital innovation, a new era in global finance is emerging — one characterized by greater inclusivity and growth. At the heart of this evolution is the rise of real-world assets tokenization: the process of converting real-world assets into digital tokens that can be traded securely and efficiently, enabling to raise capital and pursue new portfolio diversification options.
Tokenization Transforms Capital Markets
To understand why tokenization is such a game-changer, let’s look at the private debt market. Traditionally, large corporations raising debt through bonds face lengthy processes, hefty fees, and complex documentation, involving numerous intermediaries. Meanwhile, smaller companies, unable to issue bonds due to high entry barriers, are limited to loan options offered by banks.
Tokenization has flipped this model on its head. By digitizing issuance, companies can drastically reduce the costs and timelines associated with raising capital. What once took months and exorbitant fees is now more time and cost-efficient, allowing smaller enterprises to engage with capital markets directly. While these benefits are evident in private debt markets, the impact of tokenization extends even further, particularly for small and medium-sized enterprises (SMEs).
Historically, SMEs have struggled to access capital markets, primarily due to high intermediary costs, unstandardized risk-adjusted returns, and complex exit processes for investments. Banks have acted as gatekeepers, capturing a significant portion of the margins.
With tokenization, even businesses with smaller capital needs can bypass banks and access alternative funding routes. As tokenization adoption grows, I am convinced that unstandardized risk will be addressed next by pooling tokens into risk-adjusted buckets, with rating agencies providing ratings for these pools.
On the investor side, tokenization enables investors with smaller amounts of capital to access alternative assets that were previously reserved for institutional or HNW investors. For example, the tokenization of real-world assets such as commercial aircraft or tokenization of fund units providing working capital for fertilizer imports, are just a few of the products ATME is currently developing, democratizing access to private equity and driving liquidity within the industry. Real estate and commodities markets are also seeing the advantages of digitized assets where a high-value commercial real estate project allows that property to be divided into digital units. Investors can then buy smaller shares of the property, making it possible for individuals with varying levels of capital to participate in an investment that was once only available to large institutional players.
All in all, tokenization brings liquidity and flexibility to traditionally illiquid markets, changing the way investors approach these asset classes. Tokenization’s greatest strength lies in its ability to lower barriers for both issuers and investors.
Overcoming Challenges
It’s important to acknowledge that embracing a tokenized economy doesn’t come without challenges, particularly in navigating the regulations that govern digital assets. Fortunately, there are jurisdictions that have implemented legislation for digital assets, such as Bahrain. The Kingdom has taken a progressive stance towards regulating tokenization, ensuring that businesses can adopt blockchain technology within a secure and structured environment. The Central Bank of Bahrain (CBB) has created a framework that balances innovation with investor protection. This has made the country a regional hub for digital assets, attracting businesses and investors to its financial ecosystem.
Security at the Core
In digital finance, security is non-negotiable. Digital asset exchanges must prioritize safeguarding the data of the participants and their holdings. Private blockchains like the one used by ATME offer robust privacy and security features that ensure transactions are secure and transparent. Multiple layers of encryption and advanced digital custody solutions further enhance the protection of tokenized assets, allowing businesses and investors to confidently interact with each other. Additionally, adherence to robust Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements guarantees that all transactions meet the highest standards of integrity.
Charting the Future
As we look ahead, the relationship between digital assets and traditional finance will continue to evolve. In the next five years, more industries will likely embrace tokenization as a primary tool for raising capital. Sectors like agriculture, mining, and base metals are already showing interest in how tokenization can streamline their financing models and unlock new opportunities.
The future of finance isn’t about choosing between traditional and digital assets – it’s about integrating the best of both worlds to create something better. Tokenization offers a path to a more inclusive, secure, and efficient financial ecosystem. By embracing this shift, businesses and investors can chart new avenues for growth, positioning themselves at the forefront of a transformed global market.