Top crypto executives shared the stage with the who’s who of finance at the World Economic Forum in Switzerland recently, alongside presidents and other policymakers. Among these was Brian Armstrong, the founding CEO of Coinbase, the biggest digital asset platform in the US and among the biggest in the world.
Speaking from a grey Davos, Armstrong was asked about the role of tokenisation in modern-day finance. This is a question that often comes up. What is the deal with crypto? Do we really need it? It’s a question that any new technology has to face, or live up to, as adoption and utility play catch-up to the potential that holds profound implications for the system it’s set to disrupt.
This one question, though, focused specifically on tokenisation. What need does tokenisation serve? “There are about 4-billion adults globally who are unbrokered. They don’t have access to any kind of high-quality investments,” he said. “This is the engine of wealth creation that everybody should have access to, and crypto’s going to help make that happen.”
Luno argued the same point when we gave customers access to more than 60 US tokenised stocks on the platform last year, without them having to convert from rand to dollar or go through a broker to invest. Access to the S&P 500 is easy in the app, as it is for Tesla, Amazon or Apple, and even gold in tokenised form — one of the best-performing assets of the past year.
An academic paper from 2021, Understanding the Drivers of Financial Inclusion in South Africa, estimates that 29.7% of South Africans have investment accounts. About 65% of South Africans own a bank account. The issue of the unbanked is a huge challenge in the country, but there’s also the obvious gap between people who have a bank account but don’t own wealth-building financial tools. Consider that the country’s population is projected to be about 64-million.
Tokenised investments and other crypto assets on digital asset platforms provide pontential investors with tools and easy user experiences that remove barriers to entry to these types of investments. And this is not to discount the role of financial advisers in the financial system, who are well placed to advise their clients on where these new asset classes fit into an investment portfolio.
But for those who haven’t had access, it gives them an easy way to invest in a company such as Nvidia, which has grown more than 1,000% in value over the past five years, a crypto asset such as bitcoin, a burgeoning asset class by any measure, or gold.
Democratising the greater financial system was always going to be a long game, and it’ll still be some time before crypto can claim its small part in making that happen, but democratising financial choice is happening right now.
De Wit is country manager for Luno South Africa
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