We have already talked recently on the Parfin blog about the future of the financial market with the arrival of crypto assets. We discussed in detail the concept and advantages of tokenizing assets, we already indicated the opportunities and potential of this market and even revealed how it is possible to have it.

Now, it is time to explore the tokenization process of an asset and show how this can generate a competitive advantage for those interested in entering the market.

But, first of all, the question that needs to be answered is: do you know what, in fact, can be tokenized?

The first step is to classify assets into 3 different types: regulated financial, non-regulated and physical.

Physical assets
Physical assets, such as cars and real estate, are some examples that have already taken the lead in the tokenization race - examples that were executed in the Central Bank's Lift Challenge. There are already others interested in digitizing these types of assets due to advantages such as high liquidity and, above all, fractioning.

“There are some advantages that are interesting: today you cannot buy 1/3 of a house. You might even be able to, but it is a difficult process. So, tokenization offers the opportunity to fractionate”, says Marcos. “Investors can buy a fraction of an asset that they would never buy in full,” he says.

The executive also warns about excessive bureaucracy. “It's no use tokenizing a car if you keep the encumbrance center, the notary’s office, the State Traffic Police Department... It is necessary to interact with this and change the processes. Property: there is no point in having to go to the notary and sign the deed”, he concludes. “I don't want to have a restaurant franchise, I don't know how to operate, but the owner of the restaurant opened ten more units and is selling fractional participation in the business. As I like the restaurant and it is expanding into a region that makes sense, I buy a share.” Marcos Viriato, CEO of Parfin.

Regulated financial assets
Among the regulated financial assets are debentures and shares, which are characterized by a more liquid secondary market – especially in relation to credit – and with greater transferability. But is it worth digitizing an asset of this kind?

“A tokenized share would not exactly be an efficiency gain. Perhaps there are some operational gains, for example, from settlement and transferring the asset into deposit. But perhaps not an increase in liquidity in the secondary market, because the exchanges are already liquid”, says Marcos Viriato, CEO of Parfin.

On the other hand, there is the promise of credit financial assets (such as corporate bonds) achieving greater liquidity, in addition to operational and efficiency gains. “You can automate the payment of coupons, for example, there are functionalities in the blockchain that allow you to do this”, points out Viriato. “And you could easily use these assets for lending, in a very advanced and futuristic view of using tokenized financial assets, in DeFi protocols for collateralized lending”, he continues.

Non-regulated financial assets
On the other hand, the non-regulated ones (judicial bonds, carbon credits, royalty programs, among other examples) bring with them the characteristic of greater flexibility – as there is no prior baggage of regulation. With the same promise of efficiency gains, they can be tokenized and traded. “I see a huge opportunity to generate assets for monetization. Today there are no carbon credits, for example, just a promise to create them”, says Viriato. But for him, this is just one of the stages of the new reality.

“You need to have a certifying company, to validate the capture of those cubic meters of carbon and tokenize the representative of that, so that you can trade and sell”, Marcos Viriato, CEO of Parfin.

Token reliability and adoption barriers
Digitization is on the rise for those familiar with crypto assets, but there is a consensus that barriers will remain present until the market understands the power of tokenization and embraces this transformation.

“The individual thinks like this: 'I'm buying my apartment, I don't want to know about tokens. Give me the deed right there; I don't even know how to keep the token. Where am I going to store this thing? What if it disappears?” exemplifies the CEO of Parfin.

“The bank will take care of your property; don't worry if the private key will disappear or even if you don't know what a private key is. Your property is tokenized and the bank is in custody,” adds Viriato, reinforcing the role of Parfin’s solutions in tokenization. “It is in this sense that Parfin starts its job (partnership in solutions), to facilitate and break down these barriers.”

Market potential for those who tokenize assets
Those who are already active in the market and have decided to tokenize financial, non-financial or physical assets are taking the lead in a race of great opportunities in the coming years. Leading financial institutions have understood this and want to take advantage of the additional revenue gains or cost savings that asset digitization can generate.

As long as legislation follows the evolution of tokenization and offers the security and regulatory support that investors want, the promises of reduced operating costs and efficiency gains should become reality in a very short time in the market.

What about your company, have you thought about tokenizing an asset?
If you have not thought about it yet, it is better to embrace this new business model once and for all. Parfin has solutions and expertise that accelerate the adoption of your company with security and ownership, generating gains in revenue and efficiency. Come tokenize with us!

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