Yesterday the BIS and Committee on Payments and Market Infrastructures (CPMI) delivered a report to the G20 on tokenization. That paper was both upbeat yet sober, balancing the opportunities, risks and steps that central banks need to take. A separate G20 report published today from the Financial Stability Board (FSB) is far more skeptical on the topic. Currently, there’s little risk because it views the adoption of tokenization as “very low” but growing. It also published a report on crypto-asset policy implementation.
At a more granular level, the risk is limited because most tokenization projects use permissioned blockchains and only use programmability in a limited way. Hence, the transactions are still relatively simple rather than composable. While the sector bemoans the current fragmentation which limits the tokenization benefits, from the FSB perspective, this reduces risk because it limits growth.
The FSB seems unconvinced about the benefits of tokenization, arguing that other current technologies can achieve similar results. It questions the appetite for tokenization adoption and outlines numerous hurdles in its path. Plus, it spends significant time delving into the potential risks.
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