Global law firm DLA Piper, in collaboration with its Aldersgate Digital Ledger Solutions (DLS) group, has launched TOKO, a blockchain-based ‘tokenisation engine’ that will provide clients with a form of ‘digital share certificate’.
While the jargon can get impenetrable, the concept is quite simple and practical. The idea is that TOKO can create a unique identifying token that provides unequivocal proof of ownership of an asset, or a proof of ownership of a share of that asset. That token can then be traded, if the owner wishes to.
Such technology is especially useful where the asset may not already have a strong regulatory framework that governs ownership, for example multi-owner agreements for works of art. Although, it could be used for any asset, of any kind, including company shares.
Speaking to Artificial Lawyer, Martin Bartlam, International Group Head of Finance & Projects and FinTech Global Co-Chair at DLA Piper, said: ‘[This is a way of] representing a fractional interest in an object, like a share certificate. It is a ‘neutral entity’, which can be assigned value in relation to that asset.
‘That asset could be a work of art, or even a traditional share [in a company]. This is not a cryptocurrency, although it’s based on the same technology. It represents something unique that can be recognised by more than the two people who transact it, but it has no intrinsic value in itself.’
He added that the power of the tokenisation engine they have built with the help of Hedera Hashgraph, which leverages a private blockchain, is that the tokens ‘can be a representation of anything’.
DLA Piper and Aldersgate DLS successfully completed the first tokenisation project on the TOKO platform yesterday, with a piece of fine art work commissioned and purchased by a group of DLA Piper Hong Kong partners.
Created by Chinese artist Wang Xiao Bo, this bespoke project was structured as an unregulated security offering through the Aldersgate DLS TOKO platform with legal advice provided by DLA Piper.
Unlike existing tokenisation offerings in the market, TOKO provides clients with the unique combination of legal experience from a leading full service, global law firm coupled with cutting edge technological capabilities, the firm explained.
Commenting on the launch, Stevie Ghiassi, the founder of Legaler, and an expert on the use of blockchain tech in the legal field, told this site: ‘The most novel aspect of using blockchain technology is that we can create something that is digitally scarce, and this is going to lead to the tokenisation of everything you can imagine from stocks and property, all the way to artwork.
‘By issuing a token that represents a real world asset, we’re able to create secondary markets for them and also fractionalise their ownership, giving investors access to assets they were previously unable to get exposure to. For instance, owning a very small share of an investment property or perhaps even a minimal stake in an investment fund that may previously have only been available to accredited investors.
‘The difficulty has always been having a secondary market to trade them in and TOKO appears to be trying to make it easier by reducing the legal overhead in both issuing tokens and then trading them afterwards. The internet is the new supply chain and platforms like TOKO are creating a bridge to move any type of asset into the digital realm, securely and in a way that makes it efficient to trade.’
He added that there are other systems in the market that also offer tokenisation, but the addition of DLA Piper’s legal input, which can ‘make sure issuances are compliant and determine what’s regulated vs unregulated’ would be a differentiator.
The regulatory advice point is especially important as plenty of legal input would be needed in areas where a token was created for an asset in a heavily regulated area, such as publicly traded companies.
So, there you go. A blockchain solution that looks practical and that a major law firm is getting fully behind.