THE NEWS

Authored by Michael Lebowitz via RealInvestmentAdvice.com,

There is tremendous value in the world of crypto! Given some of our recent opinions (linked below), you probably did not expect to hear those words from us. Digital tokenization of assets, made possible by the crypto-blockchain construct, can boost efficiency in the capital markets, thus greasing the wheels that drive the economy.  

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• Bitcoin Is ‘A Hyped Up Fraud’ Says Jamie Dimon

Our views on cryptocurrencies and meme coins haven’t changed, but digital asset tokenization is different and could drastically redesign financial markets for the benefit of the capital markets and the economy.

What Is Tokenization?

Asset tokenization is the act of digitizing the ownership of an asset. At a very high level, it is not that different from the way your bank manages your checking account. Your bank doesn’t have a vault stuffed with your cash in it. Instead, it has a computer with a series of 1s and 0s representing your cash balance. Banks essentially digitize our money.

Digital asset tokens represent real-world assets, just as the banks’ 1s and 0s represent your cash. The range of assets that can be tokenized is limitless. Before we get into the details of tokenizing assets, it’s worth sharing some unique examples of how tokenizing assets benefits the sellers and buyers of the tokens. Consider these possibilities:

Movie Property Rights

A movie producer may issue tokens to fund the production of a movie. Not only would this finance the movie creation, but it might allow the producer more artistic freedom by avoiding the large studio companies that often dictate budgets and many aspects of the movie.

In exchange for their funding, the token owners might receive a percentage of future revenue from the film and the rights or partial rights to the film. Furthermore, they might also receive free premiere tickets as a bonus.  

Drug Development

A scientist or pharmaceutical company may source capital to research a new cancer drug via tokens. In exchange for funding, token owners could receive the rights and future revenue from the drug. Not only would this provide a new source of funding for the pharmaceutical industry, but it’s also a new way for individuals to donate to a cause they care about and possibly benefit financially.

Art

A painting might be tokenized to share ownership of one painting or a collection of art. Token holders, for their part, could receive revenue if the art is leased to museums. Further, art enthusiast token holders can own a fraction of a prized piece of art. While revenue may or may not benefit the token holder, some ascribe much non-financial value to owning such works of art. 

Future Earnings of an Athlete

A 16-year-old high school athlete with exceptional baseball skills but little money could tokenize his future baseball income. Token holders who can scout athletes at a young age can provide some income for the kid today and share in his revenue if he makes it to the big leagues.

Hotel Rooms

An investor or company could buy a hotel and fund its purchase with room tokens. The holder of the tokens may receive future revenue whenever the room is rented. Moreover, tokens may give the investor a discount for that room or other rooms owned by the hotel owner.

Here are a few more ideas to highlight just how distinctive and vast the potential to raise and invest capital is:

• Shipwreck treasure exploration

• Podcast rights

• Carbon offset values

• Vineyards

• Poker player winnings

• A patent or copyright

• Food truck

• Arcade/vending machines

• A sports team

We get into the tokenization weeds a bit in the following sections. However, whether you stop reading here or at the end, what we hope you take away from this article is that the tokenization process opens many new doors for those looking for capital funding. Equally, it significantly increases the number of unique and diversified investment opportunities for investors.

More simply, it makes capital markets more effective!

How It Works

The following is a step-by-step summary of the tokenization process:

• Identify the asset: Select a tangible or non-tangible asset to tokenize.

• Verify ownership and legal compliance: Confirm the asset’s rightful owner and legal and regulatory compliance with the asset’s sale.

• Define the structure: Choose the token’s properties, such as its value, divisibility, and the number of tokens to be issued.

• Create a smart contract: Develop a blockchain-based smart contract to govern the token’s issuance, rules, and transferability rights.

• Mint the tokens: Make the smart contract live on the blockchain and generate the digital tokens.

• Sell the tokens: Market and sell the tokens. Numerous ways exist to accomplish this, including an initial coin offering (ICO), security token offering (STO), private sale, or direct issuance to specific investors or stakeholders. All investor accreditation and qualification rules apply to tokens.

• Manage and trade: Enable the token holders to trade and possibly redeem tokens while maintaining complete transparency of all trading activity on the blockchain.

Token Platforms And Exchanges

The platform and exchanges take the digital token from an idea to a funding mechanism and tradable asset.

The token platform is like the factory for our product. The platform includes the lawyers, technical analysts, and back offices responsible for creating the digital security. Thus, it is where the tokens are created, hosted, and managed. This comprises regulatory compliance, initiation of smart contracts, and token creation. Ethereum, Binance Smart Chain, Polygon, and Solana are a few of the larger platforms. The token issuer is mainly responsible for managing platform-related tasks.

Token exchanges, like the stock exchanges, are where the tokens are traded after they are created on the platform. Some examples include Coinbase, Binance, and Kraken. Traders, investors, and broker/dealers are the primary users of the exchanges.

Some companies like tZERO offer both platform and exchange services. Furthermore, they are an SEC-registered special-purpose broker-dealer for digital tokens.

The importance of blockchain is that it provides much more transparency than the current financial system. A token’s ownership and its entire transaction history are available for anyone to see. Furthermore, the platforms and exchanges ensure that the tokens are tied to an asset and verified by external data sources to ensure the value and veracity of the assets backing the tokens. Lastly, any payments to the investors or the issuer can occur instantly. This avoids the multiple-day settlement process and weeks and months of legal paperwork that many asset transactions currently incur.

Summary

Here are the key benefits of digital tokenization:

• Better liquidity

• More transparency

• Around-the-clock market access

• Cost-effectiveness

• Fractionalization

• It makes capital markets more inclusive for funders and investors

• Enlarge the pool of investable assets

As judged by the benefits, digital tokenization is a significant upgrade from the current financial system. However, despite the promising outlook, the adaptation process is slow. For the token market to compete against traditional capital markets, more explicit regulations and a greater understanding and trust of the blockchain among retail and institutional investors and the government are required. It will be incumbent on the government, financial industry, and investor alliances to form guidelines, regulations, and governance to help create a solid and trustworthy foundation.

The economic benefits of tokenization are massive. Financial markets for liquid and illiquid assets will be more efficient, cheaper to fund and transact in, and less exclusive. If tokenization takes off as we think it can, the benefits could be substantial for the capital markets, but much more importantly, the economy and the nation’s populace.

The Bank of Canada cut interest rates by a quarter percentage point – as expected – and called the trade battle with the US a “new crisis,” but pushed back on expectations that policymakers were on a predetermined cutting path.

“We’re now facing a new crisis. Depending on the extent and duration of new US tariffs, the economic impact could be severe,” Bank of Canada Governor Tiff Macklem said in prepared remarks of an opening statement.

Macklem called the uncertainty of the tariff dispute “pervasive” and said that it was “already causing harm.” 

Officials said the “continuously changing” US tariff threat was hitting consumers’ spending intentions and limiting businesses’ plans to hire and invest.

At the same time, Macklem said the bank “will proceed carefully with any further changes” to borrowing costs, and officials would “need to assess both the upward pressures on inflation from higher costs and the downward pressures from weaker demand.”

There’s lots of red in the red-line from the prior statement:

Breaking down the details:

Economy

• Past interest rate cuts have boosted consumer spending and business investment, increasing domestic demand in the fourth quarter by a robust

• 5.6%.

• Economic data since our January MPR suggests the Canadian economy ended 2024 on a stronger footing than we expected

• Overall, GDP grew 2.6% in the fourth quarter after upwardly revised growth of 2.2% in the third quarter. This growth path is considerably stronger than we were expecting based on the information we had in January.

• Looking ahead, the trade conflict with the United States can be expected to weigh on economic activity, while also increasing prices and inflation.

• Credit has become more difficult to access for some businesses, and with a weaker Canadian dollar, the cost of imported machinery and equipment has risen.

Job market

• Job growth also strengthened around the end of the year before stalling in February.

• Growth in employment increased in November through January, surpassing labour force growth, and the unemployment rate declined to 6.6%.

• There were also signs that wage growth is moderating.

Inflation

• Inflation has remained close to the 2% target.

• The temporary GST/HST holiday has lowered some consumer prices, but January inflation came in a little firmer than expected at 1.9%.

• Inflation is forecast to increase to about 2/% in March with the end of the tax break.

• It will take some time for the impacts of higher costs and weaker demand to work their way through the economy and affect the prices Canadians will face.

• Governing Council will be tracing the impact of cost pressures through to consumer prices.

• They will also be closely monitoring inflation expectations. Keeping medium- and longer-term inflation expectations well anchored is imperative to ensure any rise in inflation is temporary.

• Our surveys also suggest business intentions to raise prices have increased as they cope with higher costs related to both uncertainty and tariffs. At the same time, inflation expectations have moved up as Canadians brace for the possibility of higher prices.

Tariffs

• The impacts of uncertainty and tariffs on inflation are more difficult to assess.

• Uncertainty that weighs on household and business spending tends to put downward pressure on inflation. And new tariffs will hurt our exports and weaken business investment. But costs are rising too, and this will put upward pressure on inflation.

• A weaker Canadian dollar and new retaliatory tariffs both make imports more expensive. Businesses are also telling them that uncertainty ‘itself imposes new costs.

• While it is too early to see much impact of new tariffs on economic activity, our surveys suggest that threats of new tariffs and uncertainty about the Canada-US trade relationship are already having a big impact on business and consumer intentions.

• Monetary policy cannot offset the impacts of a trade war.

Perhaps most notably, Canadian policymakers also reiterated that there’s a limit to how much they think they can intervene. 

The tariff battle will come with an inflation shock, the bank said, and it will “be tracing the impact of cost pressures through to consumer prices.”

“Monetary policy cannot offset the impacts of a trade war. What it can and must do is ensure that higher prices do not lead to ongoing inflation.”

Macklem concluded by noting that the retaliatory measures and the recent depreciation of the loonie against the US dollar are among the rising costs of the trade dispute.

“A weaker Canadian dollar and new retaliatory tariffs both make imports more expensive. Businesses are also telling us that uncertainty itself imposes new costs.”

All of which is wonderfully ironic given the tough talk from newly crowned globalist PM Mark Carney who was full of piss and vinegar towards Trump’s tariff threats:

“My government will keep our tariffs on until the Americans show us respect and make credible, reliable commitments to free and fair trade,” Carney said in a statement.

Good luck Mark.

“President Trump’s latest tariffs are an attack on Canadian workers, families and businesses,” Carney said in the statement. 

“My government will ensure our response has maximum impact in the US and minimal impact here in Canada, while supporting the workers impacted.”

The reaction was muted for now in the Loonie…

BoC’s decision comes just minutes after US Commerce Secretary Howard Lutnick discussed the potential for discussions with Canada on tariffs…

.@howardlutnick: “What does @POTUS want? He wants to worry about major things for national security… these are the kind of tariffs that are going to make sure these things come back to America and are built in America — and then on April 2nd, he does his reciprocal tariffs.” pic.twitter.com/IjlQFH1Lhf

— Rapid Response 47 (@RapidResponse47) March 12, 2025

And that followed a Bloomberg report that Canada will announce counter-tariffs on about C$30 billion ($20.8 billion) of US-made products on Wednesday, according to people familiar with the matter.  Government officials are expected to announce the details in the next hour.