Both Russia and other countries are demonstrating a growing interest in the tokenisation of conventional assets as a separate type of digital investment. The conversion of physical assets into digital tokens expands their potential: it increases their liquidity and makes them more accessible to a wide range of investors. In its report, the Bank of Russia analyses global and Russian trends in the tokenisation of real world assets and proposes to discuss the specifics and prospects of such a phenomenon.

After the creation of distributed ledger technologies, the digital assets market began to develop rapidly. Having started from cryptocurrencies, it has turned into a true virtual universe with various participants and products. Today, it is possible to create a digital image of actually any material object on a blockchain. A token, which is essentially an entry in an information system, entitles an investor to a reward, e.g. the right to receive a real asset or income from its use, the right to the object itself, as well as certain privileges as a co-owner of a company. In various countries, including Russia, tokens are already issued for exchange-traded commodities (gold, grain, etc.), real estate, works of art, wine, and other assets with unique characteristics. However, it is too premature to talk about the proliferation of this practice.

The attitude to the tokenisation of traditional assets is only just forming worldwide. There is neither a generally accepted definition nor a classification of it or common approaches to its regulation. Although in most jurisdictions with mature digital markets, central banks either develop specific rules or adopt or apply existing regulation, the mere fact that a token represents ownership of a non-digital asset may require an additional adjustment of infrastructure and regulation. The digital rights framework (including digital financial assets, utilitarian digital rights, hybrid digital rights) is most suitable for tokens in the Russian legislation. This enables the digitisation of various rights to objects even now. However, there are still issues relating to individual assets, which have to be discussed.

The authors focus on the economic and legal nature of tokenised assets, consider their benefits and risks, and analyse practical cases in order to understand the specifics of this phenomenon and assess its potential. At this stage, the authors do not intend to prepare specific proposals for regulating the new segment.

The Bank of Russia proposes to discuss the possibility of tokenising certain real world assets, taking into consideration their specifics, and asks readers to send their comments no later than 27 December 2024.

The article does not represent the views of UDF Space