Asset Tokenization: bringing liquidity to the

illiquid.
Tokenization is the process of converting rights to an asset - like a
shareholder certificate - into a digital token on a blockchain network. There is
a tremendous amount of attention and focus on this application of
blockchain technology, and for good reason. The process of moving a
physical, productive asset onto a blockchain network allows the owner to
gain some advantages of 'cryptocurrencies' whilst retaining the
characteristics of the original asset.

The two distinct classifications of an asset are Tangible and Intangible; below
we will highlight the distinctions between each, generally speaking, and in
the context of tokenization.
Some examples;

- Intangible // This is an asset which doesn't exist in the physical realm;

think of a patent, or a copyright. Often there is a cash flow associated with
these assets, often in the form of licensing fees, in the example of a patent. If
the owner of said patent could 'tokenize' their asset, theoretically they could
sell a percentage share of all the benefits of owning that specific patent. To
shed some light on the size of this market, the American multinational
company, Qualcomm has a total of 36,000 patents with a combined market
capitalization of 101.3 billion US Dollars.

An excerpt from a Bloomberg Intelligence article circa 2015, on the topic of

patent monetization.

charlesspeakman@protonmail.ch      www.tokenizedassetmanagement.com  
March  1,  2018  
 
  
 

- Tangible // Real estate, diamonds, sovereign wealth fund assets;

During the summer of 2017 the British Royal Mint announced plans for a new
digital asset they are championing. Its name is the Royal Mint Gold, or RMG
in short. Each RMG represents ownership of 1g of high grade gold held in
The Royal Mint Vaults and will be tradable in a CME derivatives market. For
the more sophisticated blockchain investor, the Royal Mint's blockchain
provider is Prova.

This is an example of how a tangible asset can be tokenized to provide

certain benefits & efficiencies that were not previously possible, solely
existing in the physical world. Something to highlight; the RMG can actually
be redeemed as the physical metal itself, by the Royal Mint. (The RMG Fact
Sheet will be attached at the end of this article).

Nation States

As of late, there has been an increasing amount of news around the subject
of nation states issuing their own digital token, or ‘crypto currency’. The Bank
of England began specific research into digital currencies for use at the
central bank in mid 2016, with a press release published in the OMFIF Global
Public Investor 2017 publication, titled "Digital future for sterling: assessing
the implications". (Relevant documents will be attached at the end of this article,
including the BoE’s research questions and a report on the Macro Economics of a Central
Bank Digital Currency)

- Venezuela // A notable, and by now a possibly failed attempt at a Central

Bank Digital Currency (CBDC) is that of Venezuela and their Petro Token. This
is - or was – an attempt at tokenizing the nations allegedly vast sums of
wealth in the form of large holdings in physical gold, silver, diamonds and oil.
However it received significant push back from both the international
community, and its own country’s Constituent National Assembly declared
the currency illegal. Independent analysts have made numerous remarks
regarding the lack of organization in the process of issuing the Petro token;
for example their has been 2 separate announcements both with conflicting
statements on which blockchain the Petro will be operating on. It isn’t hard
to foresee that actions like this will only worsen the existing uncertainty
surrounding Venezuela and their commendable attempts to modernize their
economy. (The ‘whitepaper’ of the Petro will be attached at the end of the article)

charlesspeakman@protonmail.ch      www.tokenizedassetmanagement.com  
March  1,  2018  
 
  
 

- SWF Tokenization // Another interesting concept, which has been

cropping up in the media quite regularly over the past 2 quarters, is the
concept of tokenizing a nation’s Sovereign Wealth Fund. In mid to late 2017,
Estonia entered the headlines when Kasper Korjus - managing director of
Estonia's e-Residency Program - announced a proposal to issue a
government-managed cryptocurrency, in what would be the first ever Initial
Coin Offering by a Nation State. However at that time, the European Central
Bank responded stating; "Within the legal framework of the European Union,
in all member states that, like Estonia, have introduced the signal currency,
only the euro is the legal tender and the monetary policy lies exclusively with
the European Central Bank". In the words of Coin Desk journalist at the time;
"It seems Estonia might be putting the cart before the horse”.

Although the majority of developments appear to be positive in nature, there

is some negativity floating around when it comes to nation states and
embracing blockchain & cryptocurrencies. A startling piece of news
originating from Poland claimed the Polish National Bank had allegedly
issued a smear campaign aimed at cryptocurrencies via a popular YouTube
account, with approximately 90,000 subscribers. The bank allegedly paid the
owner of the YouTube channel $30,000 for the creation of a video in which
cryptocurrencies were depicted in a negative light. (A hyperlink to the original
article, in Polish, will be attached at the end of the article).

In this short piece we have highlighted a number of different applications of

tokenization in relation to physical assets, – tangible and intangible – sovereign
currencies, sovereign wealth funds and a nations capital reserves. I do not doubt
that the activity and advances being made will only increase through the remainder
of the year, and we will be sure to cover the most significant of those as they come.

Image  by  Benjamin  Champenois  

charlesspeakman@protonmail.ch      www.tokenizedassetmanagement.com  
March  1,  2018  
 
  
 

KEY:
CM E Group // is an American financial market company operating an options and
futures exchange.
British Royal Mint - is the worlds leading export mint, making coins and medals for
an average of 60 countries every year.
OM FIF 2017 // is an independent think tank for central banking, economic policy
and public investment - with offices in London and Singapore focusing on global
policy, investment themes relating to central banks, sovereign wealth funds, pension
funds, regulators and treasuries.
Prova Blockchain // is an open-source distributed ledger for trading a
commodity or digitized physical asset.
Qualcom m // is a world leader in 3G and next generation mobile technologies.

LINKS:
RMG Fact Sheet // https://rmg.royalmint.com/wp-
content/uploads/2018/01/RMG_Factsheets_Brochure_JAN18-Digital-Gold-
v3.pdf
Petro White Paper //
http://www.elpetro.gob.ve/Whitepaper_Petro_en.pdf
Polish National Bank Article //
https://www.money.pl/gospodarka/wiadomosci/artykul/kryptowaluty-
kampania-nbp-knf,65,0,2398529.html
Bank of England CBDC Macro Report //
https://www.bankofengland.co.uk/-/media/boe/files/working-
paper/2016/the-macroeconomics-of-central-bank-issued-digital-
currencies.pdf?la=en&hash=341B602838707E5D6FC26884588C912A721B1
DC1
Bank of England Research Questions //
https://www.bankofengland.co.uk/-
/media/boe/files/research/cbdc.pdf?la=en&hash=27D6074B68121BCAA5E2
BB50693C031CCE9F8658

charlesspeakman@protonmail.ch      www.tokenizedassetmanagement.com  
March  1,  2018