Investing in digital assets
The 21st century is arguably defined by digitality. Although the digital sphere predates the arrival of the millennium, the speed and increased availability of digital devices, internet connectivity and range of platforms integrated the digital into politics and governance, the economy, education and wider society. With this integration comes a host of issues, innovations and opportunities. One such innovation is digital assets. Defined as anything that can be created and stored digitally and has value, digital assets have evolved as the internet itself has evolved. Starting off as images, documents and videos posted and stored online via cloud services, digital assets have grown to encompass cryptocurrencies, central bank digital currencies, security tokens and tokenisation of assets.
What are the defining qualities of a digital asset?
It must have value (not necessarily monetary value);
It must generate value for its owner;
Ownership and rights of the asset can be transferred via purchase or gifting;
It can be stored digitally and is discoverable.
In an era with the digital realm has a direct impact on the physical world, digital assets are a part of daily life. From ‘tangible’ items such as NFTs, crypto coins and metadata to more abstract examples such as corporate brands, digital assets aren’t just the terrain of tech companies and investors. However, there has been significant interest in digital assets and digital asset management, especially opportunities for them as an industry. Take blockchain for example. The distributed ledger technology has spawned digital currencies and NFTs, both of which have exploded in popularity and usage since their creations. Although both have their limitations and teething issues, they still attract investment from both independent players and large corporations. AMZN is set to launch an NFT Marketplace. Upgrades to the bitcoin network unintentionally gave the digital currency’s smallest denomination the ability to store megabytes of data, creating a whole new use for bitcoin and enhancing its value.
A 2020 report by the OECD on the tokenisation of assets highlights the benefits of tokenisation of securities and uses of distributed ledger technologies – both of which are integral to digital assets. Increased transparency, easier tradability of assets and increased efficiency in terms of speed and cost. As the report puts it: “it (tokenisation) allows for fractional ownership of assets which, in turn, could lower barriers to investment and promote more inclusive access of retail investors to previously unaffordable or insufficiently divisive asset classes.” The proliferation, value and investments in the growing sector have prompted the creation of digital asset management software and service providers. With offerings such as IBM’s Aspera on Cloud, Bynder and DCAM, the digital asset sector continues to grow and offer opportunities for business, investment and innovation.
OECD (2020), The Tokenisation of assets and Potential Implications for Financial Markets, www.oecd.org/finance/The-Tokenisation-of-Assets-and-Potential-Implications-for-FinancialMarkets.htm
Uzsoki, D. (2019). Tokenizing Real Assets: Examples from Switzerland. In Tokenization of Infrastructure: A blockchain-based solution to financing sustainable infrastructure (pp. 18–24). International Institute for Sustainable Development (IISD). http://www.jstor.org/stable/resrep22004.6
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