12 tips from cryptocurrency experts for businesses working with tokenized assets ScrgruppEn

For many consumers, dealing with certain industries — including finance and real estate — is a frustrating experience due to the overwhelming amount of paperwork and red tape that comes with executing a transaction. Not surprisingly, the cryptocurrency industry has a technologically advanced solution: tokenization. By representing real-world assets like real estate, art, stocks, bonds — basically, anything — as tokens on the blockchain, transaction parties can trade, transfer, and manage assets more easily. The percentage of tokens owned by an individual represents their percentage stake in the underlying asset.

It’s a simple enough solution – but as is often the case in the cryptocurrency industry, complexity comes with regulatory compliance. In the United States in particular, there is still little clarity around the coding of RWAs, and regulations are likely to emerge and evolve in the coming years. Below, 12 members of the Cointelegraph Innovation Circle share their advice for businesses currently offering or considering offering an asset tokenization service.

Choose the appropriate assets to encode

The key is choosing the right assets to tokenize. For example, understanding the key differences between physical assets – such as works of art, real estate, etc. – and rights – such as stocks, bonds, etc. – is crucial. Projects participating in this challenge must take into account duties related to public offerings of their token assets and the contractual structure linking the token to the token asset. – Shiraz Ahmed, Storm Partners

Constantly monitor regulatory updates

Companies must ensure clear disclosures, implement strict anti-money laundering and know-your-customer procedures, emphasize data security and privacy, and proactively engage with regulators. It is essential for businesses to constantly monitor regulatory updates, maintain adaptability, and seek guidance from legal professionals specializing in tokenized assets to maintain compliance and reduce potential risks. – Irina Litchfield, Lumeria

Know that tokenized assets can be classified as securities

As companies explore asset tokenization, they must keep regulatory compliance at the forefront. Specifically, they need to understand that tokenized assets, depending on their nature, may be classified as securities by regulatory bodies such as the Securities and Exchange Commission. Therefore, they must ensure registration, disclosure and compliance with securities laws to avoid legal repercussions. – Tomer Varshaur Noni, Kryptomon

Don’t give up on spot asset audits

Whether it’s a paper certificate, a blockchain digital token, or a non-fungible token that tracks a real asset like a house, a car, an expensive watch, a painting or a supply chain item, there is still no substitute for instant asset auditing. Remember, the RWA token is merely a claim of ownership. If the actual item is no longer with the seller or custodian, then you have a problem. – Zain Jaafar, Zain projects

Remember “time compliance”

Token asset institutions must remember “time compliance.” This entails following current regulations and anticipating future regulations. Token regulation is changing, so organizations need adaptable compliance solutions. It’s like playing 4D chess with regulatory bodies – anticipating moves while keeping an eye on the present. – Arvin Khamsa, NFTs sold out

Incorporate a flexible design

These digital frontiers are new, and so is their legal landscape. When tokenizing assets, remember this: Regulatory compliance is not an afterthought, it is your trusted guide. Embrace it from the beginning. Incorporating a flexible design that can adapt to evolving laws and norms. Preventative regulatory insight will prevent you from tripping over compliance rocks while sailing the tide of coding. – Erkki Colditz, OÜ Popspot

Multi-party account integration

For companies that tokenize assets, integrating multiparty computing can be a forward-thinking approach to regulatory compliance. MPC allows data to be processed securely while keeping the data decentralized and private. As regulations evolve, a focus on advanced data security methods such as MPC could position tokenized assets favorably in terms of compliance and investor confidence. – Thiago Serudio, Partesia Blockchain

Ensure the authenticity of assets

As in the art world, cryptocurrencies must adopt strict provenance to ensure that assets authentically match their stated provenance. If digital representations are said to be equal to those of real-world significance, then they should be held to the same standard. This will help ensure bad actors face severe barriers when attempting to trade fraudulent assets and isolate the value of this emerging class. – Oleksandr Lutskevich, CEX.IO

Say “no” to custody

RWAs are now a trend. We need to make sure we say “no” to custody. Any custodial solution (including ERC-regulated compliance specifications mandating approved whitelisting or counterparty checks) should be avoided at all costs. There are ways to resolve legal issues, ensure secondary sales between known entities, and organize primary releases – all without custody. – Jagdeep Sidhu, Sisquin Foundation

Ensure smart contracts are updated

Companies must ensure that their smart contracts to tokenize assets include accurate and up-to-date regulatory requirements, such as ownership restrictions or investor qualifications. For example, a real estate tokenization platform must program the smart contract to restrict real estate ownership to only accredited investors, maintaining compliance without manual oversight. -Vineeta Rathi, Sistango

Be diligent about white label products

Tokenizing RWAs has become an attractive bridge between emerging blockchain technology and traditional finance, so there should be more interest in white-label products. Nothing is truly “one size fits all,” and this is increasingly true in the world of tokenized assets, which face unique hurdles such as digital copies, tokenization, fractional ownership and more. – Megan Nivold, ping x

Learn the difference between security codes and utility codes

Prioritize regulatory compliance. Businesses need to understand the difference between security tokens and utility tokens, as well as the specific regulations in the jurisdictions in which they operate. Establish processes to monitor ongoing compliance, and anticipate that regulatory requirements will change over time. To be safe, engage a legal team with experience in securities law and blockchain law. -Anthony Georgiadis, pastel grid

This article was published by the Cointelegraph Innovation Circle, a vetted organization of top executives and experts in the blockchain technology industry who are building the future through the power of communications, collaboration, and thought leadership. The opinions expressed do not necessarily reflect the views of Cointelegraph.

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