Focusing not only on tokens but also on “tokenization” ─ For a new American dream[Column]| coindesk JAPAN | Coindesk Japan

This year, many American lawmakers will be watching crypto assets (virtual currencies). For example, FTT, the exchange token of the failed cryptocurrency exchange FTX. There is no doubt about the role of oversight in the token economy to prevent abuse and keep innovation in the spotlight.

With proper oversight, equal energy should now be invested not only in crypto assets (tokens) but also in tokenization (tokenization). Tokenization has the potential to bring about a paradigm shift for the economy, for every American citizen, and for people around the world.

The process of tokenizing real-world assets, the use of cryptographic technology to represent physical assets, is already happening, but it’s barely talked about in the US political scene. But tokenization is the innovation that may have the greatest impact on the economy, the American middle class, and the lives of those at the bottom of society.

To understand why American politics, especially the Democratic Party, should seize this opportunity aggressively, it is important to understand the recent history of the Democratic Party in America.

chased by republican firefighters

During the early years of the Obama administration, I served on the U.S. Congressional staff during the Great Recession, and during the Biden administration, during the COVID-19 pandemic and subsequent economic crisis, I served in the Treasury Department. was While much has changed in America from 2009 to 2022, one thing that hasn’t changed is the role Democrats and Democratic administrations have played in dealing with the crisis that erupted under the Republican administration.

Among Democrats, dark humor has expressed a persistent frustration that their political capital is being used to put out fires they didn’t start. By the time the fire is out, the Democrats have saved the American economy from disaster, but have failed to deliver the structural changes in the economy that will fundamentally change the situation of the American people.

From the 1980s to the present, the Democratic Party’s motivation has been to create an economy in which those born into the working class can, through hard work and the right amount of government support, improve their situation. rice field.

Making that vision a reality is difficult, especially when the economy is in crisis. By the end of the Biden administration, the Inflation Reduction Act may have come to be seen as the catalyst.

But the chance to tokenize trillions of dollars of illiquid assets (such as real estate) could be the silver bullet that Democrats have long sought. Moreover, it may also appeal to conservatives who want to realize economic benefits through free market principles.

Tokenization of illiquid assets

Now, American lawmakers and officials have a chance to focus on a revolution in investing in alternative assets and more that will unlock the bright American dream for millions of people.

alternative assets: Assets other than stocks and bonds, which are traditional investment targets. Specifically, there are real estate, infrastructure, agricultural products, private stocks, futures, options, etc. Traditionally, liquidity is low, but instead it is high yield. Tokenization of alternative assets is expected to increase liquidity.

Wealth that is passed down through generations is often generated by illiquid assets (fixed assets) such as real estate.

Access to the stock market through savings vehicles such as defined contribution pensions has undoubtedly had a significant, positive impact on the budgets of many typical American households. And it is true that long-term wealth creation can be enhanced through investment in illiquid alternative assets.

What if market participants and politicians supported the tokenization of illiquid assets and created a way for American citizens to invest in them?

All of a sudden, you will be able to multiply the profits you make through your lifetime’s labor.

Additionally, tokenization using blockchain technology brings a level of transparency and risk mitigation to individual investors that is not available anywhere else. For example, imagine a worker holding an on-chain token for attractive illiquid assets.

Due to large-scale tokenization, the cost borne by individuals is negligible. And it becomes possible to own some of the valuable assets that would otherwise require large sums of money.

american dream

There are certainly risks associated with investing in and tokenizing alternative assets that politicians should consider. Even though alternative assets are tokenized, they carry downside risk for individual investors.

Market participants will face skepticism from politicians and regulators who see alternative asset investments simply as a way for companies to make money while exposing consumers to high risk of loss. In the aftermath of the financial crisis, politicians and regulators have deep concerns that corporations will pass on losses to society and only reap profits.

If politicians, especially Democrats, focus as much on tokenization as they do on individual tokens this year, we may have a more equitable economy ten years from now.

The American Dream isn’t just a story to tell yourself, it’s a real opportunity for everyone.

Mr. John Rizzo: Senior vice president of public affairs at the Clyde Group, a PR and marketing firm in Washington, DC.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
| Image: Zachary Keimig/Unsplash
｜Original: Policymakers Need to Focus on Tokenization, Not Just Tokens