DTCC Digital Belongings world head and managing director Nadine Chakar made a compelling case for the advantages of tokenization in her testimony earlier than the Home Monetary Providers 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} by means of digital securities and tokenization options. The agency has been a cornerstone of economic 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 advanced 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 economic 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 forms of tokenization: Digital Twin Tokens and Safety Tokens — each aiming to streamline transactions, scale back prices, and broaden investor entry.
She mentioned:
“Tokenization provides elevated effectivity and decrease prices by enabling swifter and extra environment friendly transactions, decreasing processing inefficiencies, and higher managing reconciliation.”
Chakar additionally famous that tokenization might increase the investor base by making belongings extra accessible by means of elevated automation and higher knowledge availability.
Challenges
Regardless of the promising developments, Chakar acknowledged the challenges of integrating DLT into present monetary techniques.
She pressured the necessity for industry-wide coordination, standardization, and sturdy regulatory frameworks to handle safety dangers, compliance issues, and interoperability points.
In line with Chakar:
“Transitioning to a DLT-based monetary system shall be a monumental activity. 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 rules with present monetary frameworks, advocating for the “similar exercise, similar threat, similar regulation” precept.
She additionally known as for additional research on guaranteeing the authorized enforceability of tokenized belongings, operational resiliency, and acceptable therapy beneath insolvency regimes.
