5. A POTENTIAL MARKET BUILT FOR THE FUTURE
Several studies and market surveys predict an enormous growth in the tokenization of assets. According to a study by the World Economic Forum, by 2027 the amount of assets to be digitized will be up to 10% of the world’s GDP. Moreover, a volume in the crypto market of $24 billion dollars per day is projected, with a market capitalization of around $6,000 billion dollars by 2027. Tokenization will undoubtedly have a strong impact on the most institutional issuance products, such as stocks and bonds. Therefore, a rotation from conventional financing models to more sophisticated and efficient models on a fully digital plane is initiated. The traditional IPO is replaced by the STO (Security Token Offering), the traditional OPA is replaced by the IDO (Initial Digitalization Offering), benefiting directly from lower overall costs for issuance and marketing.
In a second phase, shares of small and medium-sized companies or real estate will be replaced by tokens with premium or incentives. Little later this new model will absorb cars, wine, art and other collectibles, turning something illiquid and costly to trade in the markets, attracting a new generation of investors.
There are some open questions about the process of this tokenization. Let’s remember that it is about adapting an endless number of physical assets to their digital equivalent and ready to be used in many ways. I am not only talking (although it may seem so) about the asset itself, in this phase it is key the structure and format of that asset, so that it is attractive and circulates freely in the so-called web 3:
How and when will they be tokenized?
What would be the driver of this change?
What will the transition phase be like in the medium term?
How long will it take?
If we want to see it a little more grounded in data (those $6,000 billion of CAP and the $24 billion in volume for 2027), we are left with a distribution approach such as:
21% in Listed Equity
4% in Unlisted Equity
4% in other equities
17% in mutual funds
3% in bonds
3% in housing liquid securities
31% in other financial assets
17% in crypto assets
Within this 17% of wealth distribution in crypto-assets, BELOBABA is positioned with full conviction and guarantees, being a regulated vehicle under active management, which is represented by our token KHAN, an STO adapted to the change in the rules of the game.
6. BUSINESS OPPORTUNITIES
The value chain of digital assets is different from the current system, and therefore requires different capabilities and concepts for both institutions and investors. Earlier I commented that owning the private key means owning the asset, and this implies the need for new approaches for the three main business areas that reach the financial industry: Issuance, Trading and Custody Services.
6.1 ISSUANCE SERVICES
One of the main areas of this business and the beginning of the trading process is the issuance of tokens, i.e. making any token available. Tokenization service providers must provide technical solutions that are well aligned with regulatory requirements.
For example, a legal entity that owns real estate could tokenize it using a framework that consisted of legal and technical aspects, being able to give investors a fraction of that property, which would otherwise be inseparable. As you see the possibilities are endless, and brokers will have to learn how to perform new processes to create new financial products on Blockchain, after carefully assessing the needs of their customers.
A good approach, not only can significantly reduce administration and transaction costs for large institutions, but also allow small and medium-sized enterprises (SMEs) easy and cost-effectively access to the new capital market. The digital transformation that is coming is not small, nor applicable to a few, but involves all the actors that make up the financial structure and engine of a country, regardless of their size, operations and needs. Along with it will also come an evolution of regulation.
6.2 INFRASTRUCTURE AND TRADE
There are ongoing initiatives that are building a regulated and reliable digital infrastructure, where digital assets can be processed very efficiently. BELOBABA is a clear example of such infrastructure.
Exchanges, without going any further and although it may not sound believable today, have great potential to capture significant market share in the digital asset space. Their main advantage is that they bring regulatory compliance, an established clientele, strong brand equity and a good service track record. In short, exchanges must build a new infrastructure to support and market the new internet money and new speculators. We can think of new markets, where there are specialized players on both sides (supply and demand), which should lead to efficient scenarios and better processes.
Different markets are already being established around the world, seeking specialization, given the diversity of types of digital assets that exist today. All countries should start positioning themselves seriously in the token exchange race, firstly because they are at a clear disadvantage (the race started more than 6 years ago) and secondly because they cannot ignore the reality and the opportunity to create business in what will undoubtedly be the largest financial market in history.
6.3 CUSTODY SERVICES
When we talk about custody, we are talking about giving an individual service to the client who needs to keep his private keys in safe custody.
This service eliminates the stress and responsibility for the customer to hold both passwords and private keys to their wallet, while safeguarding their digital assets. Institutions and providers of this service must take a leadership position in this space, meeting the high standards of security demand by doubling the protection of assets by improving configuration and including new security modules where necessary. As it is considered important to have a seamless integration into the digital experiences of both clients and backend institutions, asset managers will need to integrate custody solutions with intelligent interfaces to help them transition between the current model and the new demand.
6.4 NEW BUSINESS OPPORTUNITIES
Beyond the opportunities mentioned above, there are countless possibilities with crypto-assets, but this task will not be easy to start with, as it will require the entire financial sector to evaluate the real demand, both from their clients and from new clients.
From BELOBABA we have always been clear that we will take advantage of all the new business opportunities that will open up in the future, from the creation of automated and simple services around crypto-assets, big data on asset holdings, to the creation of multitasking platforms that help simplify activities as tedious today as tax returns. We also foresee that non-core support services (such as information solutions, data feeds, structured products, indices or derivatives) will have their business opportunity.
BELOBABA, being a totally digital company and immersed in blockchain, is beginning to be very attractive to institutional money, since the code and algorithms provide us with a more complete vision of a client, allowing us to better prepare risk profiles and give advice on investments for life goals.