Token Financing: How Tokenization Will Change the Economy

Token financing has the opportunity to change the world economy drastically. Security tokens will enable organisations to bring real-world assets online, and decentralised finance (DeFi) aims to replace all existing financial services by decentralised solutions.

One class of security tokens, asset-backed tokens, are connected to a tangible or intangible object that has economic value; it essentially digitalises an asset and records its associated information on a blockchain. Tokenising assets, including real estate, companies, art or digital assets, means lowering costs for issuers, but also improving transparency, efficiency and liquidity of real-world assets. Tokens offer us an opportunity to re-imagine our economy, but how to get there remains a challenge.

Therefore, the 2Tokens project organised a third round table to discuss what token financing is, how it will impact the economy, and what we need to do to make it a success. The first round table, on November 6, 2019, discussed why we need tokenisation, what is required to achieve value from tokenisation, and how we should move ahead with it. During the second round table, on January 14, 2020, we tried to understand the challenges faced when designing new, token-driven, ecosystems. During this third and final round table on February 11, 2020, we took a deep dive into all aspects of token financing.

The event took place in Amsterdam and was hosted by CMS. With over 80 attendees, including representatives from investments firms in the UK and NL, as well as the Dutch regulator AFM, the Dutch central bank DNB and Dutch Government officials, it was a great success. Seven topics related to token financing were discussed:

1. Business models: what economic value does token issuance bring for companies? Is there a need for another funding source or are existing options sufficient?
2. Legal frameworks & responsibilities: due to its decentralised nature, tokens come with problems such as market manipulation and insider trading. What standards should startups/companies adhere to when raising funds using tokens and how can consumers, investors, as well as the company itself, be protected against malicious behaviour?
3. Global token standards: how can we get a token…