Tokenized real-world assets present new dangers, such as market volatility and regulatory difficulties, the Bank of Russia cautions.
Real-world asset tokenization is still in its infancy and does not yet present any severe systemic hazards.
The Bank of Russia cautions that as the practice grows, it could pose serious dangers, particularly regarding money flows to unregulated sectors and the exposure of conventional financial players to cryptocurrencies.
The central bank clarified that tokenized assets are not immune to the dangers connected to their underlying real-world assets in a 47-page study report.
The collateral and, thus, the tokenized asset itself may be impacted by these risks, which include theft, damage, or loss during use, storage, or transit. The Bank of Russia:
The description of the object, the rights to which are certified by the tokenized real-world asset, may contain errors or inaccuracies that could lead to a mismatch between the original asset and its digital representation.”
The possibility of double tokenization, in which the same asset is tokenized across several blockchains, is another danger associated with token asset monitoring. Liquidity problems persist despite the increasing adoption of tokenized assets.
The Bank of Russia points out that because these assets are frequently linked to their underlying assets, any stress or volatility in the token markets may cause “mass investor actions,” destabilizing the markets for both tokenized and real assets.
Although the paper emphasizes the advantages of tokenizing real-world assets, it also points out that the participation of data providers and oracles may compromise the accuracy of price and quality data for tokenized assets.
According to the paper, market stability may be impacted by manipulation or inaccuracies in oracle data, particularly when certain oracles are exempt from national rules.
The central bank pointed out that real-world asset tokenization still needs to be increased, particularly when considering the global financial sector.
