Nadine Chakar, the Global Head and Managing Director of DTCC Digital Assets, presented a compelling argument for the advantages of tokenization during her testimony before the House Financial Services Subcommittee on Digital Assets on June 5.

Chakar emphasized the potential transformative impact of tokenizing real-world assets on the US financial markets. She underscored DTCC's role in modernizing financial industry infrastructure through digital securities and tokenization solutions, leveraging its extensive experience processing $3.0 quadrillion in securities transactions in 2023 alone.

Addressing lawmakers, she stated:

"Tokenization represents a natural progression in our efforts to simplify complex financial processes and enhance market efficiency."

In her detailed testimony, Chakar outlined the significant benefits of tokenization in managing and processing the lifecycle of financial assets, including tokenized securities. She described how tokenization converts rights or ownership units of assets into digital tokens on a blockchain, potentially revolutionizing traditional financial asset processing.

Chakar highlighted two primary forms of tokenization: Digital Twin Tokens and Security Tokens, both aimed at improving transaction speed, reducing costs, and broadening investor access.

She explained:

"Tokenization offers enhanced efficiency and cost savings by enabling faster transactions, reducing processing inefficiencies, and improving reconciliation."

Chakar also noted that tokenization could expand the investor base by making assets more accessible through automation and increased data availability.

Acknowledging the challenges, Chakar emphasized the importance of industry-wide coordination, standardization, and robust regulatory frameworks to manage security risks, compliance issues, and interoperability challenges associated with integrating Distributed Ledger Technology (DLT) into existing financial systems.

She emphasized:

"Transitioning to a DLT-based financial system requires collective efforts from the entire financial ecosystem, including regulatory bodies, to establish a secure and resilient digital assets infrastructure."

Chakar urged lawmakers to align tokenization regulations with existing financial frameworks, advocating for principles like "same activity, same risk, same regulation." She also called for further research to ensure the legal enforceability of tokenized assets, operational resilience, and their treatment under insolvency regimes.