Galaxy Digital: Tokenization Approaches The Mainstream

Thomas Cowan, vice-president of tokenization at the regional winner Galaxy Digital, explains why the digital asset company has deemed a 300-year-old Stradivarius violin.

Global finance: There have been a lot of discussions lately on physical assets in tokenization such as gold, real estate and art. What are the advantages? When you token a collection like a Stradivarius 1708 violin, as your company has done recently, do you still have to go through the same documentation process requiring that if you sell it via an auction house?

Thomas Cowan: A difference is that once you have finished this reasonable diligence and you have put the assets on the channel – like an NFT which is mapped to the violin – all this information remains encapsulated in the NFT: the history of the violin, its former owners, etc.

Girlfriend:: And that makes it more easily exchanged?

Cowan: The next person will not have to make so much diligence, because they will already have history. You end up saving a lot of costs on the side of reasonable diligence, because the source of truth and the recording source are entirely in chain, already there.

Another advantage is transparency. Ring a publicly recorded NFT on the Ethereum blockchain [as happened with the Stradivarius] Provides a checkable and waterproof and provenance file.

Girlfriend:: By token a 300-year-old violin who formerly belonged to Catherine Le Grand, what financing opportunities do you open?

Cowan: The owners can unlock liquidity without requiring a sale if they convert the assets to a digital token. The violin can then be used as a guarantee. This can fundamentally transform how these assets interact with the financial markets.

Girlfriend:: Can tokenization make global finance safer?

Cowan: Think of the situation before the 2008 financial crisis, when you can join a security pool based on mortgage debts, but you did not know the performance of underlying loans. Well, with tokenization, you see each underlying loan. If I buy a senior slice of a pool of debts, I know exactly what this risk looks like because I can see each loan.

Girlfriend:: What were the main challenges to ensure that this project occurs?

Cowan: Legal aspects were an obstacle. With a traditional IPO or a emission of bonds, you have legal documents, which are quite standard in the industry. It turns out that there are no standard legal documents for violin tokennisations. So we had to really start from scratch.

Girlfriend:: What are the other ripe areas for tokenization?

Cowan: I think we will really start to see an increased interest in chain debt, in particular structured products and private credit, over the next two years. Tokenization technology can create many efficiency there.

Girlfriend:: What about real estate and actions?

Cowan: I think real estate is still relatively distant. You have laws on properties that differ depending on the country, the state and the municipality, for example. In addition, a large part of history with real estate is always based on paper.

As for actions a few months ago, I would have said that we had a long way to go. But because of speed with regulatory clarity [especially in the US] And how much the securities and exchange commission moves [with regard to crypto and blockchain technology-enabling regulation]The industry can move more quickly on tokenizing actions.

Girlfriend:: What obstacles remain before the tokenization of financial products becomes widespread?

Cowan: We still have regulatory challenges, and of course the identity and know the challenges of your customer (KYC) and anti-flow (AML). These do not disappear.

Girlfriend:: Overall, what does tokenization mean for global finance in general? Will it really change the landscape? Cowan: Over the past decade, we had advanced without regulatory clarity. But when we are given road rules, we will see a lot of capital, in particular institutions, flooding in industry because they have seen the value of technology. We will obtain a reduction in costs, but also a much more inclusive economy.