Tokenized Economies Need Local Currency
If nothing changes, the entire tokenized world ends up settling in someone else's money.
Tokenized economies face a critical challenge: the absence of a local currency to settle transactions on the blockchain. While the digitization of assets like bonds and securities has progressed, the payment aspect still relies on outdated banking systems, causing delays. Developing regulated, local-currency settlement instruments that work seamlessly with tokenized assets is crucial.
The countries that lead in this area will gain a significant advantage due to the high costs of changing infrastructure once it's established. Dollar stablecoins currently dominate, but they can't fully benefit from local payments without introducing currency risk. Hong Kong's progress in tokenizing green and infrastructure bonds, as well as Japan and Korea's initiatives, demonstrate the potential of tokenization.
However, a key missing piece is a locally denominated, regulated token that can settle on the same blockchain. Hong Kong's new Stablecoins Ordinance sets a high standard for issuers, fostering trust in the process. The success of these tokenized markets depends on incremental integration, as each connection becomes more cost-effective over time.
While dollar stablecoins may still dominate volume, the true value of local-currency tokens lies in their widespread integration, even before demand arises.
Written by urgent.news from Newsweek's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.