Earlier this week, Chuck Mounts, Chief DeFi Officer at S&P Global (the parent company of S&P Global Ratings), spoke to crypto advocte Scott Melker about the tokenization of everything.

Here is how Gemini’s Cryptopedia explains tokenization:

Generally speaking, a token is a representation of a particular asset or utility. Within the context of blockchain technology, tokenization is the process of converting something of value into a digital token that’s usable on a blockchain application. Assets tokenized on the blockchain come in two forms. They can represent tangible assets like gold, real estate, and art, or intangible assets like voting rights, ownership rights, or content licensing. Practically anything can be tokenized if it is considered an asset that can be owned and has value to someone, and can be incorporated into a larger asset market.

The concept of tokenization precedes blockchain technology. The financial services industry has implemented some form of tokenization to protect clients’ confidential information since the 1970s. This process has typically involved the conversion of sensitive information such as credit card numbers, social security numbers, and other personally identifiable information into a string of alphanumeric characters, which are then processed through a cryptographic function to create a unique token.

To some extent, this method bears some resemblance to the tokenization process enabled by blockchain technology. However, while past tokenization mechanisms were primarily designed to protect sensitive data, blockchain-enabled tokenization allows for a more secure yet flexible tokenization of assets that has significantly broadened the potential applications of digital tokens across a wide array of industries.

Anyway, on October 11, according to a report by The Daily Hodl, Mounts told Melker during an episode of the popular “The Wolf Of All Streets” podcast:

We think the tokenization of everything is going to happen. Who can predict the exact twists and turns of the pathway to that? But in the meantime, we want to make sure our organization is positioned to provide the services and products that are needed to shed light on the risks in the industry and allow shareholders to make informed decisions…

In the long term, we think the tokenization of everything will happen, but in the range from purely centralized to purely decentralized, my personal opinion is that we’re still going to end up in some blended space.

On October 4, S&P Global published a report titled “Smart Contracts Could Improve Efficiency And Transparency In Financial Transactions”. Below are a few highlights:

Smart contracts are a core building block of decentralized applications, facilitating the execution of specified tasks (such as payments) based on predetermined business rules.

Using smart contracts in financial transactions can improve efficiency and reduce reliance on third parties like asset servicers and custodians, as well as make transaction resolutions faster–enhancing creditworthiness and the integrity of business dealings.

Smart contracts have had slow and limited adoption in the financial markets owing to key risks including technology issues (such as incorrect coding) and legal and regulatory ambiguities that make accountability difficult.

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