Panel Discussion at Eurasia Blockchain Summit
A distinguished panel, featuring Tim Bailey, the Vice President of Global Business & Operations at Red Date Technology, and William Quigley, a prominent cryptocurrency investor and co-founder of both Wax and Tether, along with Selva Ozelli, participated in a significant discussion entitled “Future of Tokenization” at the Eurasia Blockchain Summit. During the session, Tim Bailey emphasized that tokenization is still in its nascent phase. He highlighted that Red Date Technology plays a pivotal role in architecting a new global digital framework aimed at facilitating digital payments and central bank digital currencies (CBDCs).
Global Interest in CBDCs
Currently, 134 countries and currency unions, which collectively account for 98% of the world’s GDP, are investigating the potential implementation of CBDCs to transform the global banking and financial frameworks. As of now, three nations—The Bahamas, Jamaica, and Nigeria—have successfully launched their own CBDCs.
Technological Innovations by Red Date Technology
Red Date Technology is known for its innovative contributions, including the development of a blockchain-based service network (BSN) and a universal digital payments network (UDPN). The UDPN serves as a global messaging platform that supports government-regulated digital currency systems, encompassing regulated digital currencies, stablecoins, and CBDCs. During the panel, Tim Bailey stated, “The UDPN has effectively introduced an All-in-One Digital Currency Sandbox, which enables central and commercial banks to experiment and develop innovative use cases for various regulated digital currencies in a practical setting. This initiative is designed to prepare financial institutions for the evolving digital financial landscape and create pioneering services based on insights derived from our collaborations with over 25 global banks and technology firms over the past year.”
Collaboration with Global Financial Institutions
The UDPN team is actively participating in collaborative initiatives with various organizations, such as the International Monetary Fund, the World Bank, and the Bank for International Settlements. These efforts aim to explore how tokenization can advance wholesale cross-border payments. Additionally, the Institute of International Finance (IIF) has invited private financial entities to contribute to this exploration, focusing on regulatory frameworks for banks.
Tokenization’s Revolutionary Potential
William Quigley shared his insights on the transformative potential of tokenization, which he recognized back in 2014 when he co-founded Tether, the world’s first and most widely used stablecoin. Tokenization provides a means to represent assets and their associated rights digitally through tokens on blockchain technology. Quigley believes that this capability can revolutionize not just digital asset trading, including NFTs, but also any asset that can be digitally represented, such as stocks and bonds.
Emergence of Utility NFTs
As a pioneer in the digital currency arena, Quigley foresaw the vast opportunity for NFTs within the broader tokenization movement, which could unlock value and create new market opportunities. He founded WAX.io in 2017, during a period of rapid growth in digital assets when Bitcoin’s value skyrocketed from $1,000 to $20,000. Initially built on the Ethereum blockchain, the WAX platform faced challenges including high transaction fees and processing delays, prompting Quigley to develop a more sustainable blockchain tailored for blockchain gamers and NFT enthusiasts. Both Quigley and Bailey predict that the majority of future growth in the NFT market will be driven by utility NFTs, collectible NFTs, and those associated with Web3 gaming. Quigley added, “I envision that in the next 10 to 15 years, we will move towards a reality where digital currencies are the norm, and paper currencies fade into history.”
Regulatory Developments on Tokenization
There is a consensus among industry leaders that the tokenization of the global financial system is a critical trend for the future of financial markets. Encouragingly, regulators worldwide are working together to craft a legal framework for digital assets, focusing on areas such as taxation, anti-money laundering measures, and banking regulations to ensure consistency across jurisdictions. In August 2022, the Organisation for Economic Co-operation and Development (OECD) approved the Crypto-Asset Reporting Framework (CARF), which aims to standardize the reporting of tax information regarding crypto transactions. So far, 48 countries have committed to implementing CARF.
Global Compliance Efforts Against Money Laundering
The Financial Action Task Force (FATF) introduced anti-money laundering guidelines for virtual assets and service providers in 2019. According to Chainalysis, a report on self-assessments by 58 jurisdictions indicates that all reported jurisdictions have either completed or are in the process of conducting risk assessments related to virtual assets and transactions. However, some countries like China and Saudi Arabia have either banned or are moving towards banning virtual assets.
Updates on U.S. Digital Asset Regulation
In the United States, the collapse of the FTX exchange marked a significant moment in the realm of financial fraud, leading to a downturn in the digital asset market and a series of bank failures in 2023. This situation has intensified scrutiny and calls for regulation across the digital asset sector, which is overseen by multiple regulatory bodies including the SEC and CFTC. In response, the digital asset industry is advocating for the Financial Innovation and Technology (FIT) for the 21st Century Act (HR 4763), which aims to establish a regulatory framework for digital assets and is slated for a vote in the House of Representatives later this month. This proposed legislation suggests dividing regulatory responsibilities between the SEC and CFTC while also addressing stablecoin oversight and whistleblower protections.
IRS Reporting Requirements for Digital Assets
Moreover, the IRS has released a draft of Form 1099-DA, which will be used by digital asset brokers, including exchanges and wallet providers, to report transactions starting next year. This form will capture essential data such as the acquisition date of digital assets, the cost basis, transaction dates, and sales proceeds, reflecting a reporting standard similar to that used for traditional securities and commodities. Notably, profits from digital asset collectibles, such as NFTs, are subject to a 28% tax rate, which exceeds the current capital gains tax rates.
