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Date: 13/12/2024
Despite promising projections, financial institutions face critical challenges related to speed, transparency, and operational costs. In this landscape, blockchain technology emerges as a powerful solution for compliance and corporate governance.
According to the Streamlined Global Commerce: The Role of Digital Assets report by Citi Group in partnership with PwC, cross-border payment flows are expected to reach $250 trillion by 2027.
The report highlights the continuous innovation and customer benefits brought by digital assets secured and managed via tokens and blockchain. A recent example is SWIFT, which has revolutionized financial information exchange through blockchain and distributed ledger technology (DLT).
“Asset tokenization allows financial and non-financial assets—such as equities, private bonds, credit assets, real estate, and other tangible assets—to be converted into digital assets, tokenized, and managed on blockchain or DLT. This process is establishing itself as a new business infrastructure, providing efficiency gains and endless possibilities for capital access, distribution, and cost reduction in a highly reliable, secure, and fast manner.”
Digital assets are optimizing corporate treasuries, enabling comprehensive cash management, and uncovering hidden value in working capital. What are the key advantages of tokenization?
Automated Conditional Payments: Enable 24/7 settlements using smart contracts to automatically execute and guarantee conditional transactions when predetermined criteria are met.
Liquidity Management: New solutions allow clients or bank branches to pool liquidity reserves, potentially optimizing capital allocation, reducing counterparty risks, and shortening settlement times.
Automated Settlement: Nearly instant asset transfers that can reduce time and costs associated with traditional settlement processes while mitigating volatility risk—delivering greater transparency and control.
“In a financial market with increasingly stringent compliance and corporate governance rules, technologies like blockchain and tokenization stand out not only for their high innovation potential but also for the robust security levels tied to their diverse use cases.”
— Marcos Viriato, Co-founder and CEO of Parfin
The report also notes that new products and services are expanding use cases for financial institutions, including:
Settlement of Tokenized Securities Transactions: In traditional financial markets, settlement involves exchanging securities for payment—a process that can be complex and time-consuming. Tokenized securities simplify and enhance the settlement process.
Tokenization as a Service: Stocks, bonds, or other financial instruments can be converted into digital tokens that are issued and managed on a blockchain or DLT platform.
Automation of Financial Processes: Streamlining conditional payment releases, liquidity management, and operational efficiency improvements.
Citi Group’s analysis concludes that the financial sector is evolving, regardless of banks' active involvement. Regulators remain cautious about digital assets due to concerns over consumer protection and financial stability. However, more than 130 CBDC (Central Bank Digital Currency) pilots are in development globally, signaling that many governments may soon adopt DLT. Financial institutions will need to adjust their business models to stay ahead of these changes.
Adoption of these solutions is likely to grow as consumers and businesses become more familiar with them and user experiences become more seamless. With regulators providing clarity on policies applicable to digital assets, these assets are expected to gain increasing recognition as effective financial instruments.
Traditional business models continue to transform with the growth of digital assets, offering new opportunities for customers and financial institutions.
At Parfin, our mission is to empower institutions to explore the world of digital assets through a permissioned blockchain solution that prioritizes governance and privacy. Our technology is designed to meet the highest compliance standards, ensuring security and reliability in an ever-evolving market.
Discover how Parfin Platform can transform your digital asset management and simplify your financial operations.
Visit the Rayls website to learn more about its blockchain ecosystem, which bridges the best of both worlds—combining the reliability, privacy, and compliance of traditional finance (TradFi) with the access, innovation, and infinite possibilities of decentralized finance (DeFi).
You can also rely on our expert consultancy for banks, provided by specialists with experience in both TradFi and DeFi.
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