MANAMA: Investor interest in tokenisation has increased over the past few months after the Covid-19 pandemic highlighted the importance of digitalising the financial services industry.
In a new report titled “The Future Of Banking: Building A Token Collection,” S&P Global Ratings explores potential use cases for the technology and how it could affect the financial industry.
“In our view, tokenisation offers several benefits including the fractioning of assets, which enhances their liquidity and opens the door for investors or borrowers that may have been excluded from existing options,” said S&P Global Ratings credit analyst Mohamed Damak.
“In addition, we believe the technology could allow new players to enter the market, further challenging incumbent banks’ and asset managers’ revenue.
“As a result, and due to the new digital normal of high-speed transformation, we now expect banks to pursue new products or collaborations much faster than before the pandemic.
“With that said, the industry faces several hurdles including the different speed and willingness of regulators to implement a regulatory framework for tokenisation.
“Whether tokenisation will replace some financial products remains to be seen, but it may have positive effects on specific business lines, such as capital raising exercises, SME financing, and liquefaction of illiquid assets. Furthermore, tokenisation of assets might offer convenient and more cost efficient access to new clientele than current asset-management products, which are mostly offered to only high-net-worth individuals,” Mr Damak concluded.
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