Michael Salmony: Tokenization reshaping future of global finance

Money itself is becoming a digital asset, and this process is reshaping the future of the global financial system, Michael Salmony, CEO of consulting company Payments Innovation, said at the 10th International Banking and Finance Summit, Report informs.

According to him, one of the most prominent areas in the financial sector today is the tokenization of money. This model involves converting money and other assets into digital tokens on blockchain technology and has the potential to change the way international payments are made.

"For those who are not yet familiar with tokenization, it can be explained as putting money into digital form. Value is converted into a token that reflects the equivalent of a dollar, euro or another currency. This token cannot be forged, altered or copied. It is then transferred via the internet to any point in the world, and the receiving party can convert it back into the currency they want," he said.

Salmony noted that traditional international money transfers have for many years been carried out through the correspondent banking system, RTGS platforms and the SWIFT network. Tokenization, as an alternative to this process, offers a faster, cheaper and more transparent mechanism.

"The main promise of this technology is that money or any asset can be turned into a digital package and delivered to any point in the world as if sending an email. As a result, transactions are carried out directly, instantly and at low cost. This approach creates significant advantages compared with traditional systems, especially in cross-border payments," he stressed.

According to the expert, this model creates both major opportunities and new questions, as the direct transfer of value in a peer-to-peer format makes discussions about the future role of banks and other intermediary institutions more relevant.

"If people can transfer money directly by bringing their phones close to each other, how will the function of banks change? These institutions will not disappear completely, but their operating model will undergo a serious transformation. Tokenization offers a more effective and direct mechanism for transferring value," Salmony said.

According to him, tokenization is no longer limited to payments. Projects such as the fractionalization of real estate, carbon credits, and the digitalization of gold and other assets are expanding rapidly.

Salmony added that, against the backdrop of rapid technological development, tokenized money is already entering the global regulation phase.

"This area is increasingly being regulated, licensed and brought under KYC, or know-your-customer, procedures. Today, stablecoins, tokenized deposits, commercial bank money and even tokenized forms of central bank money are emerging," he said.

The consulting company's CEO stressed that this process is in the focus of regulators around the world.

"The ability of any person to freely send dollars or other currencies to any point in the world creates certain risks. Therefore, different countries are trying to form a legal framework in this area. The European Union has taken an important step in this direction with the MiCA, or Markets in Crypto-Assets, regulation, while work is underway on the GENIUS Act in the US. Overall, the process of defining rules for the tokenized financial system is continuing rapidly on a global scale," he said.