Tokenization adoption may solve some of the systemic inefficiencies identified in Latin American capital markets and accelerate investment and capital flow in the region, according to Bitfinex Securities.
Systemic inefficiencies, including high fees, complex regulations and structural issues such as technological barriers and high startup costs, are slowing investment and hindering capital flow into Latin American capital markets, in a phenomenon dubbed “liquidity latency,” according to the Bitfinex Securities Market Inclusion report, published on Thursday.
The region’s liquidity latency issue may be solved by the adoption of real-world asset (RWA) tokenization, which refers to financial and other tangible assets minted on the immutable blockchain ledger, increasing investor accessibility and trading opportunities for these assets.
Financial products tokenized on the blockchain introduce more accessibility, transparency and efficiency, including cutting issuance costs for capital raises by up to 4% and cutting listing times by up to 90 days, Bitfinex said. The company said tokenization could expand investor access and create more trading opportunities.
“Tokenisation represents the first genuine opportunity in generations to rethink finance,” Jesse Knutson, head of operations at Bitfinex Securities, said in the report. “It lowers costs, accelerates access, and creates a more direct connection between issuers and investors.”
Financial gap in the LATAM region. Source: Bitfinex
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Tokenization removes capital access barriers for developing economies: Paolo Ardoino
Adopting tokenized financial products may open new capital access opportunities for developing economies, according to Paolo Ardoino, CEO of Tether and chief technology officer of Bitfinex Securities.
“For decades, businesses and individuals, particularly in emerging economies and industries, have struggled to access capital through legacy markets and organisations,” said Ardoino.
“Tokenisation actively removes these barriers.”
He added that tokenized products could unlock capital more efficiently and cost-effectively while giving investors access to higher-yielding products backed by compliance and regulatory approvals.
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Bitfinex was the first exchange to receive a digital asset service provider license under El Salvador’s new Digital Assets Issuance Law, which allowed the platform to issue and facilitate secondary trading of tokenized assets.
Tokenized US Treasury bills were among the first assets tokenized by the platform, to enable “literally anyone to hedge their savings against the world’s reserve currency.”
Tokenized securities growth projections. Source: McKinsey, Bitfinex Securities
Some of the world’s largest consulting firms see tokenization as a multi-trillion-dollar opportunity.
Tokenized securities alone may reach a potential $3 trillion market by 2030 in the bull case and $1.8 trillion in the base case, according to predictions from McKinsey, cited in the Bitfinex report.
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