The Financial Supervisory Commission (FSC) has organized a “Real World Asset Tokenization Task Force” with the Taiwan Depository & Clearing Corporation (TDCC) and six financial institutions to explore the preparations needed to promote “real world asset tokenization” in Taiwan. The task force was launched at a meeting on June 13, 2024, with the collaboration of the FSC’s “Supervision Technology and Research Application Team” of the Financial Technology Co-creation Platform.
So what exactly is “real world asset tokenization”? It refers to the process of tokenizing tangible and intangible assets such as watches, real estate, wine, trading cards, stocks, and bonds in the real world, creating a virtual counterpart in the blockchain world that is linked to the value of the original asset.
Traditional financial transactions have various limitations. For example, when it comes to investing in funds, retail investors usually need to make their transactions within specific time frames on each trading day. Outside of these periods, they are unable to buy or sell. Certain funds may also have minimum investment thresholds, requiring investors to commit a certain amount of money to participate.
Real world asset tokenization (RWA) is the key to unlocking these limitations and providing greater flexibility. It is currently the fastest-growing area in the financial sector. Internationally, tokenized real world assets are believed to have potential advantages such as 24/7 trading, cross-border and cross-time zone transactions, reduced investment thresholds, improved operational efficiency, instant settlement, increased liquidity, and transparency. However, there are also challenges related to regulation, laws, and interoperability.
To explore the preparations needed for the implementation of RWA tokenization in Taiwan and to develop financial technology in a forward-looking and comprehensive manner, the FSC has collaborated with TDCC and six willing financial institutions, including Taiwan Cooperative Bank, Taipei Fubon Bank, CTBC Bank, Cathay Securities, Cathay Mutual Fund, and Yuanta Financial Holdings, to establish the “RWA Tokenization Task Force” for joint discussions on relevant promotion matters.
In order to facilitate the work of the RWA Tokenization Task Force, the FSC has invited representatives from relevant departments, in addition to the Innovation Center, to attend the meetings and gain an understanding of the professional knowledge and practical operations of RWA tokenization. These representatives will also discuss policies, regulations, and other related matters. The participating organizations have reached a consensus on the operational methods of the task force, and it is expected that two assets will be selected as tokenization targets. The task force will hold meetings approximately every 3 to 4 weeks.
In addition to discussing the tokenization process, the task force will also analyze asset custody, trading, and other aspects. The ultimate goal is for the participating financial institutions to propose conceptual verifications (Proof of Concept; POC), business trials, or applications for innovative experiments.
The FSC emphasizes the development of financial technology, particularly the rapid development of Web3 and related applications such as tokenization and decentralized finance. International organizations and other countries have already proposed relevant regulatory recommendations and development projects.
There are already many international cases of financial RWA products. For example, the well-known “Franklin OnChain US Government Money Fund” (FOBXX) is currently ranked in the top three in the category of US Treasury RWA market value on the data analytics website rwa.xyz.
FOBXX was launched on the Stellar blockchain in 2021. It is the first mutual fund registered in the United States to use a public blockchain for transaction processing and record equity. At least 99.5% of its total assets, a tokenized government money fund, are invested in US government securities and cash-backed repurchase agreements. The transfer agent for FOBXX, Franklin Templeton Investor Services, maintains the official records of equity through a proprietary blockchain integration system.
Transactions on the blockchain are available 24/7, allowing FOBXX to be traded at any time. Users can purchase it through the Franklin’s Benji Investments application.
In addition, BlackRock, the asset management giant and the world’s largest ETF issuer, also entered the RWA field in March of this year, launching the BlackRock Institutional Digital Liquid Dollar Fund on Ethereum, with a token called BUIDL as the fund’s representative.
The underlying assets of this fund consist of cash, US bonds, and repurchase agreements, representing funds that will be invested in these asset classes to ensure the stability and growth of the fund’s value. At the same time, the fund will use blockchain technology to track the ownership and trading of assets.
The fund will also pay returns to token holders daily through the blockchain, providing investors with a faster and more convenient way to receive returns.
