Theses F

Theses F: Global Issues To Be Solved

Having explored the definitions of Real World Assets (RWA) and delved into the complexities of their tokenization, we now turn our attention to the unresolved challenges that persist at both the global and industry levels in the tokenization of RWAs.

F1: Lack of legally causable blockchain

The absence of a legally recognized blockchain framework presents significant challenges, particularly in the realms of taxation and ownership. Relying on private blockchain explorers, which merely repackage data accessible from public nodes, is insufficient for legal purposes. There is a pressing need for a formally and legally acknowledged master blockchain explorer dedicated to accounting purposes.

Lack of legal causality property also disables the possibility to use blockchain for asset evocating (similarly to how registration of the entity works).

F2: Entity wrapping expose asset owners to inherent risk

The practice of entity wrapping exposes asset owners to significant risks. Legal wrapping and mirroring should be discontinued as they undermine the ownership rights of asset owners. Essentially, this process swaps robust ownership protection for a fragile legal claim or receivable, subject to any regulations or arbitration rules the provider deems appropriate. It's a loophole that generates vulnerabilities and poses a threat to asset security, necessitating urgent countermeasures.

Direct legal recognition is essential to combat the risks associated with 'legal wrapping,' ensuring users have proper protection of their ownership rights over assets.

F3: Private or anonymous decentralized blockchain can’t be used for the purpose of RWA data storage

Using private or anonymous decentralized blockchains for storing serious real-world asset (RWA) data is impractical and poses several challenges. Such blockchains lack transparency, making it difficult to verify the authenticity and integrity of the stored data. This opacity is problematic for regulatory compliance and auditing purposes, where accessibility and accountability are paramount. Furthermore, the anonymity feature, while beneficial for privacy concerns, complicates the enforcement of legal and financial obligations, as it obscures asset ownership and transaction histories. For critical RWA data storage, which requires stringent security, reliability, and legal accountability, more regulated and transparent blockchain solutions are necessary. These

F4: Existing blockchains are not adequate for RWA data storage

Second-generation blockchains lack the necessary features for effective real-world asset (RWA) data storage, primarily due to their static nature and limited flexibility in handling diverse asset types and privacy requirements. For RWA management, following aspects are critical alignment of token types / standards with specific asset categories

dynamic access control (the system should allow for the authorization of specific wallets to access certain records, based on factors such as industry, region, asset type, or legal jurisdiction)

Furthermore, the immutable nature of blockchain presents a challenge for RWA data storage. While immutability ensures data integrity, it conflicts with legal requirements for data amendment or deletion, such as the 'right to be forgotten.' To address this, a mechanism for legally permissible data modification or removal is necessary, without compromising the blockchain's core principles of security and immutability. This may involve innovative approaches, such as hashing data with access restricted to key holders, though this too must balance transparency with privacy and legal requirements.

The limitations of current blockchain solutions, which either violate legal frameworks or rely on anchoring records to an off-chain database, underscore the need for a third-generation blockchain. Such a blockchain must incorporate dynamic access rules and token protocols tailored to the unique demands of RWA data storage, offering the flexibility, security, and legal compliance necessary for modern asset management.

F5: Gray zone of ‘utility’ tokens with monetary value should be eradicated

To ensure the integrity of financial transactions within the digital asset space, it is crucial to eliminate the gray area surrounding 'utility' tokens that possess monetary value. The conversion of these tokens into fiat currency should be tightly controlled to comply with anti-money laundering (AML) protocols. Specifically, this conversion should be permissible only when the tokens have been deposited through a regulated blockchain's off-ramp. Tokens that originate from unregulated blockchains ought to be immediately blacklisted to prevent their integration into the formal financial system.

The foundational requirement for a token, especially if it holds any monetary value, is that its origin or initial creation event must be on a blockchain that is regulated and compliant with existing financial laws. Any token that bypasses this criterion should be flagged and prohibited from entering the regulated financial circuit. Furthermore, exchanges that allow such tokens to be traded or converted into fiat or other regulated assets that can be converted into fiat should face strict penalties.

F6: 195 countries and 195 different approach to asset registers

Navigating the global landscape of asset registers presents a complex challenge due to the existence of 195 countries, each with its unique approach to managing and recording assets. This diversity reflects variations in legal systems, technological adoption, regulatory frameworks, and cultural practices, leading to a wide range of methodologies for asset registration and management. From fully digitalized systems in some jurisdictions to traditional paper-based registries in others, the disparity in practices complicates international transactions, asset tracking, and regulatory compliance. It underscores the necessity for harmonization efforts or interoperable standards that could facilitate more seamless cross-border asset management, reduce legal uncertainties, and enhance the efficiency of global financial and property markets.