Opinion by: Vincent Kadar, Polymath CEO
When a company sells tokenized shares in twelve -two houses in Detroit that is not really it -owned, it is more than a real estate scandal. It served as a warning throughout the real-world asset (RWA) sector.
The deal seems to be modern, including blockchain tokens, fractional ownership and the promise of rent revenue.
In fact, however, many ownership is empty, in bad conditions or not even legal for sale.
Blockchain noted each token move properly. It lacks the necessary checks to ensure that the property is real or earning a profit.
A risk throughout the sector
This is what happens when the change is careful. Tokenization can convey efficiency, liquidity and greater access to the market. Without proper protection, long problems can also be aggravated.
While the Detroit case is dedicated to real estate, the same weaknesses exist in each category of RWAs. A tokenized bond is worthless if cash flows are unsafe. A tokenized commodity is worthless if the underlying possession is not stored and proven. Without these protections, the whole process is a house of cards.
Tokenization does not guarantee transparency, implementation or investor protection. It speeds up transactions, meaning that evil actors can move as fast as legitimate market participants. For traditional markets, it is easy to imagine that the solution is to pause and evaluate the amount of tokenization.
Related: What is tokenomics? The guide of a starting supply and demand of cryptocurrencies
The answer is not to slow down the tokenization adoption. Instead, the solution is to develop core -confident systems. That way, evil actors cannot be hidden, and the risk of fraud can be greatly reduced.
An ecosystem of trust
When tokenization enters the traditional markets, it must adhere to the rules that promote market trust. Transactions should only be involved in the verified participants, and the owner must connect to proven identities, not unknown purse addresses. Trade policies should be built on technology, as can be purchased, when to be sold and under what conditions. In this way, no one can miss them.
Management is equally important. Markets require transparent processes to resolve disputes, regain emergency assets and safely upgrade systems. These are not optional features.
They are required if the tokenized assets are to attract long -term institutional participation.
When compliance, management and security are built on the foundation, investors and regulators will find that the system is designed to protect them. Without that trust, even the most advanced technology would struggle to get long -term adoption.
The opportunity in emerging markets
This challenge is not just for developed financial centers. In emerging markets, old infrastructure makes the capital accessible and expensive. Tokenization will help overcome these issues. It allows the creation of digital, flexible and global connected markets.
Many economies in these areas already have high mobile use. There is also a growing demand for investment and interest in digital ownership. These factors make it a great time for tokenization.
This opportunity can be lost without compliance with local regulations and strong investor protection. The building that follows and global compatible infrastructure from the beginning can unlock new growth. It will also prevent flaws that prevent traditional finances in these regions, such as unclear ownership notes, slow cross-border repairs, high risk of corruption and weak investor protection.
This can be done by direct transparency and safe management of market infrastructure.
Responsible Growth on Hype
Some projects are already going in the right direction. They use allowable blockchains designed for regulated assets, adopting token standards that automatically implemented compliance and cooperate with respectable carers to protect the underlying properties. These are not extras added later. These are the protections that make tokenized markets in areas such as goods, private credit and ownership of belief in global capital markets.
The potential for real-world assets is Very big. The sector can unlock trillion values, make markets more inclusive and increase efficiency in the release and trade ownership. Without the proper guards, the dangers of the industry would ruin confidence before it grows older.
The priority should not be the one who can launch the fastest. True testing can create systems that can withstand investigation for decades. Frameworks are not barriers to developing.
These are the ones who maintain the development.
Choices now determine whether tokenization delivers its promise or becomes another missed opportunity.
Opinion by: Vincent Kadar, CEO of Polymath.
This article is for general information purposes and is not intended to be and should not be done as legal or investment advice. The views, attitudes, and opinions expressed here are unique and do not necessarily reflect or represent the views and opinions of the cointelegraph.
