New report: Tokenised Assets - Pathways for EMDEs
Financial Innovation for Impact has collaborated on a new report examining the market, infrastructure and regulatory conditions under which the tokenisation of real-world assets can scale responsibly in emerging markets and developing economies.
“Tokenisation does not simply replicate existing market risks in digital form – it changes them”, says Hugo Coelho, Director of Policy and Advisory at Financial Innovation for Impact and Research Affiliate at the Cambridge Centre for Alternative Finance. “Some are reduced, others amplified, and new ones emerge. Frameworks will need to evolve, and, in some cases, they may enable new market structures altogether. Experimentation and institutional coordination have been proven to be the foundation of an effective response.”
Tokenisation underlies a fundamental shift in the architecture of financial markets as we know today. Enabled by distributed ledger technology, smart contracts and adjacent advances in cryptography, it changes the way assets are issued, traded, custodied and transactions settled. Furthermore, tokenisation changes the way users interact with money and finance, particularly in emerging market and developing economies (EMDEs).
The long-term realisable value distributed ledger technology is evolving towards a combination of monetary and payment frameworks and instruments along with a focus on real-world assets, meaning financial and non-financial instruments whose value is anchored in legal claims on off-chain rights.
Much of the public debate on tokenisation has been shaped by priorities in advanced markets, from modernising wholesale market infrastructure to improving efficiency of back-office operations and enabling new forms of institutional liquidity. While these themes are important, they are not aligned with constraints and opportunities of RWA tokenisation in EMDEs.
In EMDEs, aspects such as the development and depth of domestic capital markets, large informal sectors and higher costs of cross-border movement of capital and remittances are more relevant. Market development in EMDEs also differs: digital financial services have already scaled rapidly via mobile money, agent networks and fintech-led innovations in many of these markets and wallet-based approaches for younger demographics already outnumber traditional financial accounts.
Against this backdrop, the report:
Identifies promising use cases for RWA tokenisation in EMDEs, including which asset classes are being tokenised
Investigates legal, regulatory, policy and infrastructure pathways that can enable responsible scaling, including the role of public-sector initiatives (such as policy strategies, regulatory responses and tokenised money projects)
Draws lessons from first movers and representative jurisdictions, contributing to the growing evidence base on how financial innovation can be harnessed for inclusive growth and deepening of capital markets
Fii and the CCAF are grateful to the UK Foreign, Commonwealth & Development Office, who have supported this study and report’s creation.
Explore Fii’s work in Digital Assets & Tokenisation.