From The Economist, December 1:
Larry Fink is BlackRock’s chief executive. Rob Goldstein is the investment firm’s chief operating officer.
Ledgers haven’t been this exciting since the invention of double-entry book-keeping
Fifty years ago money moved at the speed of mail. When one of us (Larry) started his career in 1976, trades were placed over the phone and settled with paper certificates sent by courier. In 1977 a technology called swift brought standardised electronic messaging between banks, cutting transaction times from days to minutes. Today, trades between New York and London execute in milliseconds.
Now finance is entering the next major evolution in market infrastructure—one that could move assets faster and more securely than systems that have served investors for decades. It started in 2009 when Satoshi Nakamoto, a pseudonymous developer, launched bitcoin as a shared digital ledger that could record transactions without intermediaries. A few years later that same technology—the blockchain—sparked something even more transformative: tokenisation.
Tokenisation involves recording ownership on digital ledgers. It makes it possible for almost any asset, from real estate to corporate debt or currency, to exist on a single digital record that participants can independently verify. At first it was hard for the financial world—including us—to see the big idea. Tokenisation was tangled up in the crypto boom, which often looked like speculation. But in recent years traditional finance has seen what was hiding beneath the hype: tokenisation can greatly expand the world of investable assets beyond the listed stocks and bonds that dominate markets today.
Tokenising assets brings two broad benefits. First, it offers the potential to settle transactions instantaneously. Today’s markets operate on different settlement timelines, exposing buyers and sellers to the risk that one side might not fulfil its obligations. Standardising instantaneous settlement across global markets would be a leap beyond what swift ever made possible.
Second, private-market assets still rely heavily on paper—manual processes, bespoke settlements and records that haven’t kept up with the rest of finance. Tokenisation can replace paper with code, reducing the frictions that make assets costly and slow to trade. It can turn large, unlisted holdings such as real estate or infrastructure into smaller, more accessible units, broadening participation in markets long dominated by large institutions.
Technology alone won’t remove every barrier. Regulation and investor safeguards will remain essential. But by lowering cost and complexity, tokenisation can give more investors more ways to diversify.
There are early signs of progress. Tokens that represent “real-world” traditional financial assets (stocks, bonds and so on) remain a tiny share of global equity and fixed-income markets but are growing fast—up roughly 300% in the past 20 months.Much of the early adoption is happening in the developing world, where banking access is limited. Nearly three-quarters of crypto holders live outside the West. Meanwhile, the economies that built modern finance—America, Britain and the eu—are falling behind, at least when it comes to where the trading is happening. It’s true that many of the companies best placed to lead the shift to a tokenised financial system, including the dominant players in stablecoins, are American. But that early advantage isn’t guaranteed.
If history is any guide, tokenisation today is roughly where the internet was in 1996—when Amazon had sold just $16m-worth of books, and three of the rest of today’s “Magnificent Seven” tech giants hadn’t even been founded. Tokenisation could advance at the pace of the internet....
....MUCH MORE
Previously on BlackRock and tokenization:
- "Tokenized, Inc: BlackRock's Plan To Own The Fractionalized World"
- "BlackRock CEO wants SEC to ‘rapidly approve’ tokenization of bonds, stocks: What it means for crypto"
- "Tokenization’s trillion dollar promise: Wall Street leaders make their case to the SEC"
- "BlackRock Seeks to Tokenize ETFs After Bitcoin Fund Breakthrough"
And on double entry bookkeeping:
In 1994 there was great gaiety and celebration to mark the 500th anniversary of the publication of Luca Pacioli's treatise on, well, everything, hence the title: Summa. Accounting nerds around the world paid homage to the section on bookkeeping. You had to be there.
Unfortunately Benedikt Kotruljević had plowed the ground 36 years earlier with his Delia Mercatura et del Mercante Perfetto (Of Trading and the Perfect Trader) and the accounting profession had actually missed the quincentenary of the presentation of double entry bookkeeping to the world....
