Pallavi Thakur, the Director of Strategy and Innovation at Swift, and Julien Clausse, the head of Asset Foundry at BMP Paribas, shared their insights on tokenization during the Money20/20 conference.
In their collaborative presentation, Clausse and Thakur both acknowledged the significant challenges of interoperability that tokenization encounters, necessitating solutions at various levels.
Thakur, referring to points discussed in her previous presentation, highlighted interoperability as a major obstacle to tokenization. She pointed out that tokenization platforms often create separate networks or “islands” that do not naturally interact with each other.
“Tokenization is rapidly gaining traction and is on the brink of revolutionizing the securities market,” Thakur stated. However, she emphasized a major roadblock: “These tokenization platforms tend to form isolated ‘islands’ that do not inherently communicate with each other.”
These isolated islands create interoperability issues at different levels: the network layer (facilitating communication between different networks), the token format layer (ensuring token compatibility across networks), and the data layer within tokens, according to Thakur. Addressing these layers is crucial for seamless functionality.
Both speakers stressed that the success of tokenization hinges on overcoming the fragmented and divided multi-layered blockchain landscape.
Clausse echoed this sentiment, pointing to the various blockchain networks causing these challenges and highlighting the complexity of achieving true interoperability. He identified diverse blockchain projects as the root of the problem.
“There are multiple layers – network, token format, and data within the tokens,” Clausse explained. He argued that the tokenization sector needs common networks and uniform adoption standards.
Establishing industry-wide standards across diverse blockchains is vital for the future of tokenization, according to Clausse. These standards should be derived from consensus among industry stakeholders and practical, real-world applications.
Both speakers emphasized the importance of practical use cases and industry standards for the evolution of tokenization.
“There are currently multiple standards in place,” Clausse noted. “Therefore, everyone is striving to collaborate with unique standards.”
They cited examples of adhering to industry standards, such as Swift’s tokenization of small-scale renewable energy projects, which can now be financed and managed more efficiently and transparently. They called for industry cooperation and urged the crypto sector as a whole to tackle interoperability challenges.