Tokenization is “securitization done on steroids”

At CNBC’s Delivering Alpha event, Jenny Johnson discussed how digital assets disrupt securitization and the financial markets.

Securitization, a practice with over 50 years of history, is undergoing a dramatic transformation, believes Jenny Johnson, CEO of Franklin Templeton, one of the world’s largest asset managers.

During CNBC’s Delivering Alpha event, Johnson said tokenization — the process of converting asset ownership rights into digital tokens on a blockchain — is akin to “securitization done on steroids,” a term often used to describe something that exceeds expectations.

Johnson’s remarks were part of an analysis of the future of alternative investment vehicles. The executive noted that available capital and technology disruption have attracted more companies and CEOs to invest in “things for the future,” like blockchain technology. Johnson said:

“One is it allows a payment mechanism. Number two, it allows smart contracts to be programmed into the token. And three, because it’s a general ledger, it has a source of truth. So whoever has that token, all rights in that token are granted to that person.”
Johnson used Rihanna as an example to illustrate her point of view. In February, the singer released one of her popular songs as a nonfungible token (NFT), allowing holders to partially earn royalties on streaming. “My favorite example is Rihanna,” she commented about the NFT collection launched just before the Super Bowl.

“I know she’s just testing the market in these 300 NFTs […]. Well, why can she do that? She can do it because when Spotify plays a Rihanna song, it can capture the smart contract, execute and say: ‘I owe royalties here so nobody has to be involved in it.‘ And it can take the fractional payment and go to Frank, a big Rihanna fan.”