Today marks a first for Switzerland, with the issuance of the first asset-backed token launch following the implementation of a new Distributed Ledger Technology (DLT) law.
Sygnum Bank and Fine Wine Capital have tokenized premium investable wines as digital assets for trading. The asset will launch on Sygnum’s Desygnate platform, which follows the new legal proceedings set forth for DLT-based securities.
A New Era of DLT Security Tokens
With the new Swiss law going into effect today, 1 Feb 2021, Sygnum has created a fully compliant platform that facilitates the trading of tokenized securities. This is Sygnum’s first asset tokenization in the art and collectibles category, a sector that clientele highly favor, according to a Feb 1 press release.
By creating legally binding, easily trackable digital assets ownership, the measures may set a precedent for this up and coming space. Alexandre Challand, Fine Wine Capital co-founder, explains:
“Tokenization of wine assets enables us to expand our private collector investor base to new private and institutional investors interested in fractional ownership in distinctive real assets. This provides them the opportunity to hold, trade or request a physical settlement of this unique asset in an efficient manner.”
What is Asset Tokenization?
Asset tokenization is the process of creating digital tokens fully backed by a physical asset. This could occur in various assets like art, real estate, stocks, or commodities such as fine wine.
This, in turn, enables more options for traders, such as fractional ownership. In other words, portions of an asset can be traded on 24/7 markets. Asset tokenization is made possible by legally binding smart contracts, creating agreements between owners and the sellers on the blockchain.
This is all possible thanks to the breakthroughs of blockchain technology. Non-fungible tokens (NFTs), for example, can represent unique, verifiable assets. Regular cryptocurrencies exchange freely without losing any value. For example, anyone can trade 1 bitcoin for a completely different bitcoin.
NFTs, however, are unique and cannot be freely exchanged. This is observable in the case of an investable wine. Investors cannot trade it for any other wine-backed coin. The different bottles are different assets with different values.