She told lawmakers:
“Tokenization represents a natural evolution in our efforts to simplify complex financial processes and enhance market performance.”
Tokenization benefits
In her detailed testimony, Chakar outlined the significant advantages of tokenization in processing and managing the lifecycle of financial assets, such as tokenized securities.
Chakar explained that tokenization converts rights or asset ownership units into digital tokens on a blockchain, potentially revolutionizing the processing of traditional financial assets.
She highlighted two primary types of tokenization: Digital Twin Tokens and Security Tokens — both aiming to streamline transactions, reduce costs, and broaden investor access.
She said:
“Tokenization offers increased efficiency and lower costs by enabling swifter and more efficient transactions, reducing processing inefficiencies, and better managing reconciliation.”
Chakar also noted that tokenization could expand the investor base by making assets more accessible through increased automation and greater data availability.
Challenges
Despite the promising advancements, Chakar acknowledged the challenges of integrating DLT into existing financial systems.
She stressed the need for industry-wide coordination, standardization, and robust regulatory frameworks to address security risks, compliance considerations, and interoperability issues.
According to Chakar:
“Transitioning to a DLT-based financial system will be a monumental task. It requires concerted efforts from the entire financial ecosystem, including regulatory bodies, to establish a secure and resilient digital assets infrastructure.”
Chakar urged lawmakers to align tokenization regulations with existing financial frameworks, advocating for the “same activity, same risk, same regulation” principle.
She also called for further studies on ensuring the legal enforceability of tokenized assets, operational resiliency, and appropriate treatment under insolvency regimes.
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