Building the First Shariah Powered Tokenized Assets Platform

In an age where technological advancements are reshaping the financial landscape, tokenization has emerged as a revolutionary concept, unlocking new possibilities for investment and financial inclusion. This digital transformation enables assets ranging from real estate to art to be broken down into tokens, allowing for fractional ownership and democratizing access to wealth. But what sets this movement apart is its potential to bridge the gap between developed and emerging markets, offering a more equitable financial system.

Enter Fasset, a pioneering platform that has taken the concept of tokenization and aligned it with Shariah compliance, creating new avenues for ethical investing. Through its innovative platform, Fasset provides access to several tokenized assets, opening doors to high-grade and high-yielding products, even to those in emerging markets.

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What is tokenization?

Tokenization is the process of creating digital tokens that represent ownership rights or claims to an underlying asset, such as a stock, a bond, a commodity, a real estate property, or even a piece of art. These tokens are issued and managed on a blockchain or a distributed ledger technology (DLT) platform, which provides security, transparency, and efficiency for the tokenization process and the subsequent transactions involving the tokens.

Tokenization can enable fractional ownership, meaning that an asset can be divided into smaller units or shares that can be bought and sold by investors. For example, a tokenized painting can be split into 100 tokens, each representing 1% of the ownership and value of the painting. This way, investors can access assets that are otherwise too expensive or illiquid to invest in.

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What are the benefits of tokenization?

Tokenization offers several advantages for both asset owners and investors, such as:

• Increased liquidity: Tokenization can make illiquid assets more liquid by lowering the barriers to entry and exit for investors. Tokenized assets can be traded on secondary markets that operate 24/7, allowing investors to buy and sell tokens at any time and at lower transaction costs.
• Enhanced transparency: Tokenization can provide real-time information and verification of the ownership, value, and performance of the underlying assets. Tokenized assets can also be tracked and audited on the blockchain, reducing the risk of fraud, errors, or disputes.
• Cost efficiency: Tokenization can eliminate intermediaries such as brokers, custodians, or registries that are involved in traditional asset transactions. Tokenized assets can be transferred directly between buyers and sellers on the blockchain, saving time and money for both parties.
• Accessibility: Tokenization can democratize access to global assets by enabling fractional ownership and lowering the minimum investment amount. Tokenized assets can also be offered to a wider range of investors across different jurisdictions, increasing the potential market size and demand for the assets.
• Innovation: Tokenization can create new opportunities for asset creation, diversification, and valuation. Tokenized assets can be combined into different portfolios or products that offer unique risk-return profiles for investors. Tokenized assets can also be embedded with smart contracts that automate certain functions or conditions for the tokens.

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How is tokenization different from securitization?

Securitization is a process that involves pooling various types of contractual debt obligations (such as mortgages, loans, or credit card receivables) and selling their related cash flows to third-party investors as securities (such as bonds or pass-through securities). Securitization is often used to raise capital, transfer risk, or create liquidity for the originators of the debt obligations.

Tokenization is similar to securitization in the sense that both processes involve transforming assets into tradable securities. However, there are some key differences between them:

• Securitization typically involves debt obligations, while tokenization can involve any type of asset (tangible or intangible).
• Securitization usually relies on centralized entities (such as banks or rating agencies) to structure, issue, and service the securities, while tokenisation leverages decentralized platforms (such as blockchains or DLTs) to create, manage, and transfer the tokens.
• Securitization often results in complex and opaque securities that are difficult to value and monitor, while tokenization aims to produce simple and transparent tokens that are easy to verify and track.
• Securitization is subject to various regulations and standards that vary across different jurisdictions and markets, while tokenisation is still in its nascent stage and faces uncertain legal and regulatory frameworks.

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Why can tokenization empower people in emerging markets?

Tokenization can empower people in emerging markets by providing them with access to global assets that are otherwise inaccessible or unaffordable for them. For example:

• A farmer in Africa can invest in a tokenized agricultural commodity fund that tracks the prices of crops from different regions and countries.
• A student in Asia can invest in a tokenized education fund that supports scholarships and grants for students from different backgrounds and disciplines.
• A worker in Latin America can invest in a tokenized real estate fund that owns properties from different cities and continents.

By investing in tokenized assets, people in emerging markets can diversify their portfolios, hedge against inflation or currency fluctuations, participate in the growth and development of other markets, and achieve their financial goals.

Tokenization is a promising concept that has the potential to revolutionize the way people invest in global assets. However, tokenization also faces some challenges and risks, such as regulatory uncertainty, technical complexity, market volatility, cyberattacks, or human errors. Therefore, investors should exercise caution and due diligence before engaging in tokenized asset transactions.

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How Tokenisation can Help Curb Riba

One of the key financial prohibitions in Islam is Riba. Riba involves the paying and receiving of interest. Riba represents a deep-seated inequality, driven by the concentration of capital and assets in the hands of a few. Riba is driven by two forces:

1. An imbalance of power, where substantial asset ownership rests with the few; a few control the market and dictate terms that may be unfair to others.

2. Limited opportunities, where the lack of ownership among the broader population limits opportunities for wealth growth, further exacerbating inequalities.

By distributing ownership of yielding, high-grade assets, tokenization can tackle the core issues that drive Riba. Tokenization can disperse ownership across a broader population, reducing the concentration that leads to Riba. By providing access to developed market assets, tokenization empowers those in emerging markets, allowing for more equitable global financial participation.

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The real promise of tokenisation lies in its potential to level the playing field of asset ownership. By making high-grade assets accessible to all, regardless of their economic status or geographical location, tokenization can help to curb some of the Riba that exists in the world today. Tokenization offers a model where wealth is not hoarded but shared, fostering a more equitable global economy. By embracing a model that discourages Riba, tokenization encourages a more sustainable and fair financial system.

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The Bottom Line

Fassett's pioneering approach to Shariah-compliant tokenization is more than an innovation; it's a leap towards a more equitable and accessible global financial system. By breaking down barriers and building bridges between developed and emerging markets, Fasset exemplifies how technology and ethical considerations can come together.

The opportunities presented by tokenizing assets like gold, digital assets, and Sukuk, coupled with Fasset's dedication to Shariah compliance, creates a unique value proposition for investors around the globe.

In a world striving for financial equality and ethical investment, Fasset stands as a beacon, showcasing how traditional financial principles can seamlessly integrate with modern technological advancements. Its efforts in democratizing access to high-grade products offer a fresh and hopeful perspective on global investment, heralding a future where financial empowerment is not confined to specific regions or classes but is a shared global privilege.

Tokenization stands as a powerful symbol of financial innovation with a human touch. Its potential to democratize and distribute asset ownership across the world is not just a technological feat but a social revolution. By directly addressing the root causes of Riba, tokenization offers a path towards a more balanced and equitable world. It's a step towards a financial system where success is not marked by the concentration of wealth but by the distribution of opportunity, where the tools of finance are wielded not for exclusion but for empowerment.

With its combination of innovation, ethics, and global reach, Fasset is indeed a driving force in the new era of tokenization, rewriting the rules and reshaping the financial landscape for generations to come.

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