Securitization, a practice that has been around for over 50 years, is undergoing a significant transformation, according to Jenny Johnson, CEO of Franklin Templeton. Speaking at CNBC’s Delivering Alpha event, Johnson highlighted the rise of tokenization as a game-changer in the industry. Tokenization refers to the process of converting asset ownership rights into digital tokens on a blockchain, and it is being described as “securitization done on steroids.”
Johnson’s remarks came as part of an analysis of the future of alternative investment vehicles. She pointed out that the availability of capital and the disruptive potential of technology have attracted many companies and CEOs to invest in blockchain technology and other forward-looking ventures. Johnson emphasized that tokenization offers several key advantages.
“Firstly, it allows for a payment mechanism,” she said. “Secondly, it enables smart contracts to be programmed into the token. And thirdly, because it is based on a general ledger, it provides a source of truth. So whoever holds the token is granted all the rights associated with it.”
To illustrate her point, Johnson cited the example of pop star Rihanna, who released one of her popular songs as a nonfungible token (NFT) earlier this year. By tokenizing the song, Rihanna enables holders of the NFT to earn partial royalties from streaming. Johnson explained how this works in practice, stating, “When Spotify plays a Rihanna song, it can capture the smart contract, execute it, and say, ‘I owe royalties here,’ without anyone having to be involved. It can then distribute the fractional payment to Frank, a big Rihanna fan.”
Johnson also highlighted the potential for athletes to benefit from tokenization. She envisioned a scenario where athletes sell off tokens representing a portion of their future revenue stream to fans. These tokens could be considered as a form of securitization but on a much larger scale.
Franklin Templeton, where Johnson has been a part of the executive leadership for over 30 years, is a global asset management company with $1.5 trillion in assets under management. The company is currently seeking regulatory approval in the United States for a spot Bitcoin exchange-traded fund (ETF), demonstrating its interest in emerging technologies and alternative investment strategies.
In conclusion, Johnson’s remarks shed light on the transformative power of tokenization in the field of securitization. With its ability to streamline payment mechanisms, enable programmable contracts, and provide a trusted source of information, tokenization has the potential to revolutionize the way assets are managed and traded. As more companies and leaders recognize the benefits of this technology, we can expect to see further innovation in the alternative investment space.
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