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Tokenization of everything: new way to raise money and invest

Tokenization of everything is the new trend in the financial market linked to digital assets. The possibility of digitizing a real asset in order to be able to trade it has been explored in the most varied areas.

Currently, it is possible to find tokens for works of art, real estate, financial holdings, company shares. Experts consulted by Forbes believe in the literality of “tokenization of everything”. Some numbers help reinforce this idea.

A study by Boston Consulting Group (BCG) in partnership with ADDX indicates that the asset tokenization market could reach $16 trillion by 2030, or 10% of today’s global GDP. This year, the market value of security tokens (securities that generate income through the distribution of profits or dividends) should reach US$ 310 billion. “Asset tokenization allows us to reimagine the process of finding and matching investors with opportunities,” the report says.

The possibilities are countless. Through tokenization, it is possible to invest in sectors and businesses so far inaccessible to individuals. For example, the football club of your heart, a startup aligned with your ideas or even the concert of that band that never arrives in your city.

This is possible because tokens are smart contracts. The best way to describe it is to think of a currency whose functioning can be regulated. If a football club creates tokens for financial raising, fans can invest in their favorite team and receive part of the season’s profits, as long as the distribution is present in the smart contract. Another advantage is that it is possible to negotiate very small portions of assets, democratizing their access.

“I really believe in this form of financial collection, especially if you have something to offer in return. Tokens allow for greater participation by society, facilitating access to ventures and projects that would not be possible otherwise,” says Sylmara Multini, CEO of IDG, a company that creates collectible NFTs.

In their report, Boston Consulting Group (BCG) and ADDX cite five benefits of tokenization. Are they:

1. Creating proprietary ecosystems: Token providers ensure technology integration is seamless, with a large ecosystem for issuers to create a bespoke end-to-end solution.

2. Flexibility with asset registration and token configuration: Service providers allow issuers to configure their tokens in a simple and intuitive way, regardless of asset type.

3. Smart Contract Rules: Token compliance rules are encoded into the smart contract, allowing for faster processing and lower fees. There is flexibility for issuers to define rules such as who can hold the token, how many assets will be made available, and other forms of further negotiations such as transfers.

4. Easy storage, management and distribution of tokens: Tokenization service providers offer issuers an automated and transparent way to manage token distribution as well as future distribution events.

5. Make transactions, contracts and corporate acts cheaper: tokenization allows the issuer to create corporate actions where rights are already determined and communications and distribution of proceeds are scheduled, all at a much lower cost.

One of the problems is that the sector only now has some legal security, with the approval of a legal framework for cryptoassets on November 29, but which has not yet entered into force.

However, this only applies to tokens that will be considered financial assets. The others still lack regulation or legal certainty. “A little regulation is always good for security and credibility, but not having that regulation today does not detract from the merit of this form of investment. It is important to think of solutions, but without stifling operations”, says Multini, from IDG.

Token diversification
The legal uncertainty of the lack of regulation and the volatility of the cryptocurrency market (to which tokens are closely associated) made entrepreneur Ricardo Wendel adopt an alternative path to enter the world of tokens.

In order to operate within a legal framework, he relied on CVM (Securities and Exchange Commission) Instruction 88, which deals with crowdfunding operations (collective financing), and created DIVI-Hub, a regulated tokenization platform.

In practice, DIVI-Hub creates security tokens within an AWS platform (Amazon Web Services) and not in the blockchain environment of cryptocurrencies. The “divis”, as the platform’s tokens are called, are fractions of shares in projects that raise funds with Divi-Hub. They give rights to investors, whether access to the project’s or company’s profits, or specific benefits, always agreed in smart contracts.

“Tokens are not necessarily cryptocurrencies or blockchain products. Our divisions are tokens, they also have a unique tracking number, they are automated, but they are not in the decentralized environment. Better than that, it is a technology that obeys what the regulator determines”, says Wendel.

Launched in October last year, Divi-Hub has 16 thousand registered investors. This year, the platform launched two projects that raised BRL 1 million: Love Cabaret and Favela Brasil Xpress. The first was to make possible the return of a famous São Paulo nightclub. The second was for the expansion of the startup that operates in the communities of São Paulo.

“Token projects most often come from startups and newcomers are in great need of investment. Venture Capital is the first attempt at funding, but they are restricted and crowdfunding is more democratic, it allows small investors to participate and help a project they believe in”, says Wendel.

While DIVI-Hub works with security tokens outside the blockchain, IDG creates NFTs inside Web3. The company is headquartered in the United States and also operates with crowdfunding to make its projects viable.

Multini says that people are still skeptical of digital assets, but that should improve in the coming years. “Barriers and doubts always exist at the beginning. The email has already been questioned. At first nobody believed in WhatsApp. What about Docusign? Online document annotation? This was once an exception, now it’s standard”, says the CEO of IDG. “Everything went through an evolution and assimilation in people’s minds. It is a distrust that is part of it, but it does not change the fact that Web3, digital assets and blockchain are the future.”

IDG creates collectible tokens divided into four categories: original, special, rare and legendary. The last two categories add experiences to the purchase by the collector. At Carnival this year, IDG created NFTs for the Grande Rio school. The legendary token allowed the buyer to meet parade participants and receive one of the flags on the float.



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