DTCC Digital Belongings international head and managing director Nadine Chakar made a compelling case for the advantages of tokenization in her testimony earlier than the Home Monetary Companies Subcommittee on Digital Belongings on June 5.
Chakar’s testimony centered on the transformative potential of tokenizing real-world belongings and its implications for the US monetary markets.
She highlighted DTCC’s pivotal position in modernizing the monetary {industry} via digital securities and tokenization options. The agency has been a cornerstone of monetary market infrastructure for over 50 years, processing a staggering $3.0 quadrillion in securities transactions in 2023 alone.
She instructed lawmakers:
“Tokenization represents a pure evolution in our efforts to simplify complicated monetary processes and improve market efficiency.”
Tokenization advantages
In her detailed testimony, Chakar outlined the numerous benefits of tokenization in processing and managing the lifecycle of monetary belongings, akin to tokenized securities.
Chakar defined that tokenization converts rights or asset possession items into digital tokens on a blockchain, probably revolutionizing the processing of conventional monetary belongings.
She highlighted two main kinds of tokenization: Digital Twin Tokens and Safety Tokens — each aiming to streamline transactions, cut back prices, and broaden investor entry.
She mentioned:
“Tokenization presents elevated effectivity and decrease prices by enabling swifter and extra environment friendly transactions, lowering processing inefficiencies, and higher managing reconciliation.”
Chakar additionally famous that tokenization may increase the investor base by making belongings extra accessible via elevated automation and better knowledge availability.
Challenges
Regardless of the promising developments, Chakar acknowledged the challenges of integrating DLT into current monetary methods.
She pressured the necessity for industry-wide coordination, standardization, and strong regulatory frameworks to handle safety dangers, compliance issues, and interoperability points.
In accordance with Chakar:
“Transitioning to a DLT-based monetary system will likely be a monumental job. It requires concerted efforts from the complete monetary ecosystem, together with regulatory our bodies, to ascertain a safe and resilient digital belongings infrastructure.”
Chakar urged lawmakers to align tokenization laws with current monetary frameworks, advocating for the “similar exercise, similar threat, similar regulation” precept.
She additionally referred to as for additional research on guaranteeing the authorized enforceability of tokenized belongings, operational resiliency, and applicable remedy below insolvency regimes.