Now picture that local bakery, “Sarah’s Sweet Treats,” that wants to grow but is having a hard time doing so. Owner Sarah Dream is hoping to open a second location. She’s up against the intimidating prospect of obtaining a traditional bank loan—a process that includes mountains of paperwork, punishing interest rates and the ever-present threat of rejection. Now, imagine Sarah tokenizing a portion of her future profits, offering digital tokens to her loyal customers in exchange for upfront investment. These tokens aren't just shares; they represent a piece of Sarah's dream, a tangible connection to her success. That's the promise of tokenization: Financial Inclusion for Main Street. Yet whether that promise has truly been kept or just co-opted is up for debate.

Tokenization: Revolution or Reincarnation?

This tidal wave of initial excitement over tokenization created an unrealistic picture of a financial revolution. It offered a new world where anyone could raise capital and invest in anything—from real estate to rare art. So let’s keep it real — the early days were a bit of a shitshow. It truly felt like a speculative frenzy, filled with altcoins and get-rich-quick schemes. That's fading now, and good riddance.

The true opportunity is in the tech that powers it. Tokenization, in its simplest form, is the process of fractionalizing ownership and creating liquidity. It's about taking previously illiquid assets – like Sarah's bakery – and making them accessible to a wider range of investors. Stobox, for instance, is making efforts to create these alternative markets for SMEs. In fact, they’ve already tokenized more than $500 million in assets. That's a start.

Are we building a truly decentralized, democratic system, or are we simply recreating Wall Street, but with blockchain technology? Are we really enabling Sarah, or are we simply opening new doors for institutional investors to further entrench their dominance?

Social Impact: Tokenization's Untapped Potential

Tokenization’s promise goes well beyond making financial transactions more efficient. When leveraged appropriately, it can be a powerful tool for social good. Consider these possibilities:

  • Funding Social Enterprises: Tokenization can provide a direct funding mechanism for social enterprises focused on addressing pressing issues like climate change, poverty, and education. Imagine a token representing a share in a community solar farm, allowing local residents to directly invest in renewable energy.
  • Empowering Local Communities: Tokenized community bonds can finance local infrastructure projects, like building new schools or improving public transportation, giving residents a direct stake in their community's development.
  • Supporting Medical Research: Tokenizing intellectual property rights related to medical research can accelerate drug development and make treatments more accessible.

These are just a few examples, as you can clearly see, the lot is unlimited. Fulfilling this promise will need a deliberate choice to put social outcomes ahead of profit maximization. We need to create tokenization platforms for the masses and not only the 1% wealthy class.

Institutional Capture: The Looming Threat

While a positive sign, this is also a double-edged sword. On the one hand, their experience and resources undoubtedly have the power to accelerate, if not dominate, adoption of tokenization. First, they come with a quite recent history of extreme rent-seeking behavior. Further, they are frequently more concerned with advancing their own agendas than serving the public’s interest.

Consider the emergence of stablecoins which now control the vast majority of the nascent tokenization industry. Visa's investment in BVNK is telling. Are these institutions genuinely interested in democratizing finance? Or, are they simply looking to develop new markets for their existing products and services? Data suggests the latter is more likely.

The risk of centralization is real. If only a handful of large players control the tokenization market, they’d have outsized control over access to capital. This dominance gives them the power to define the terms of funding, repeating the same power dynamics that characterize toxic, extractive financial services. Liquidity challenges persist for small businesses. Secondly, they do not have access to the networks that make global fundraising possible. In doing so, this shifts the playing field unfairly from the outset.

Tokenization has the potential to revolutionize finance but only if we make the right choices now to help guide its evolution. We cannot allow ourselves to relax and allow the institutions to decide what the future will be.

  • Stronger regulations to prevent anti-competitive behavior.
  • Open-source platforms that empower individuals and small businesses.
  • Greater transparency in the tokenization process

A Call to Action: Shape the Future

The story of the future of finance is being written right now. Will it be a future where government is more democratic and empowered by informed citizens, or where inequity deepens and institutions have even greater leverage over people? The choice is ours. Don’t let tokenization turn into another Wall Street. Let's build something better. Let's build something that truly benefits everyone. The time to act is now.

Here's what you can do:

  1. Educate Yourself: Learn about tokenization and its potential benefits and risks. Understand the technology and the regulatory landscape.
  2. Support Ethical Projects: Invest in tokenized projects that prioritize social impact and financial inclusion. Seek out platforms that are transparent and accountable.
  3. Advocate for Change: Demand that policymakers create regulations that promote a fair and equitable tokenization ecosystem. Support initiatives that empower individuals and small businesses.

The future of finance is being written now. Will it be a future of democratization and empowerment, or one of continued inequality and institutional control? The choice is ours. Don't let tokenization become just another Wall Street. Let's build something better. Let's build something that truly benefits everyone. The time to act is now.