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The economy of asset tokens is imminent, but these obstacles need to be overcome


While there are potential benefits to tokenizing assets, there are now two major issues that hinder this shift.

The first obvious benefit is that anyone in the world has the potential to acquire any asset.

From a regulatory compliance point of view, anyone's ability to trade assets after opening an account is poor.

Let us give an example of the EU bank's failure to deal with Americans: once they accept these people as clients they must abide by US rules (regardless of jurisdiction), which can be very painful because the United States has real power to Punish any deviation from their rules. As a result, the risk of owning U.S. customers is far greater than the profits from them.

Obviously, compliance, anti-money laundering procedures and overall regulatory processes are always dependent on specific jurisdictions and may not necessarily meet the needs of the market.

However, the trend shows that tokenization will eventually make globalization of securities transactions possible (tokens assets will be largely treated as securities).

Digital identity


First and foremost, this thorny issue will be solved through unanimity of the anti-money laundering process and the know-your-custome process and supported by market leaders. For example, the U.S. Securities and Exchange Commission's Howey test has become the standard for determining token security.

Second, the final developed countries will start using digital identities, which are necessary for automated KYC and AML programs. The roll-out of digital identity solutions such as digital residency in Estonia is already in progress and will have a positive impact on the process of tokenization, as digital passports can also sign transactions. As long as digital identities are recognized, all processes can become digital as well, which will greatly simplify the compliance process.

Third, the criteria for creating information sharing and protection, such as the BankID program in Sweden, Norway and Ukraine, and the EU's PSD2 and GDPR provisions, have increased the need for business change.
The financial world's central organization, banking, government and credit card payment networks have come to mind and are now learning about the potential of the global market and are ready to abandon the various intermediaries and regulations that surround them.

With the introduction of digital services by banks, we can see signs of moving towards this goal: the European Commission is issuing directives to the financial sector on the basis of open data and competition principles, and the bankcard network is developing an open API.

At the same time, KYC's problem with tokens can be solved by limiting cases of investors and digital processes - for example, by piloting them in a sandboxed environment.



Lack of standards


The second obstacle to tokenization is the lack of infrastructure and some standardized methods of tokenization.

In many cases, people only think of tokenization as the creation of tokens on the public blockchain. But this is only 10% of the whole process.

Public or private blockchains themselves provide only the ability to store information on assets and have limited trading capabilities. Any complete tokenization system will include:

1. Managing user and system administrator privileges 
2. Asset life cycle management (distribution, exit, etc.) 
3. Security management 4. Integration of 
KYC and AML systems 
5. Integrated payment gateway 
6. Managing transaction fees and quotas 
7. Mobile and Web application 
8. Transaction module or integrated external transaction

In addition, every organization managing assets is trying to establish its own tokenization system, such as a real estate tokenization platform, which is a clear trend. This makes sense, because it is decentralized and allows different systems to compete for users.
So in the future every organization may have its own monetization system - just as every company now has its own accounting and reporting system. Therefore, developing comprehensive technical standards for system design, versioning, and the creation of all components is a key element of integration into the business.

Proper recording techniques make it possible to reuse the same components of the platform, increase system reliability and predictability, reduce the risk of development and integration, and most importantly shorten the time it takes to bring the product to market.



Positive change


The good news is that there is a strong impetus to establishing such links, including even those who are disrupted by the denominated economy.

Businesses will drive regulatory and infrastructure changes, vote with their money, and ultimately communities will address many advanced issues - such as ecosystem interactions, significant security, joint asset management, mathematically verifiable billing and auditing and many more.

I have always believed that tokens will be the next major event that will drive world GDP growth and make life easier for entrepreneurs.

Everything that can be tokenized will be tokenized.