Welcome to tokenized world!

Иван Ермохин Иван Ермохин Expert of Center Russia-OECD published in Digital economy
Welcome to tokenized world!

Tokenization is the process of transferring assets (from the real world) to the blockchain. It supposed to increase the liquidity of such assets.

Assets that have the lowest liquidity today has more potential for the tokenization. These include, for example, assets in the venture capital market (estimated at $ 1 trillion). Such assets may also include assets that were not previously freely traded on organized trading (shares in an LLC, personal assets of individuals, works of art, etc.).

In March 2019, Nornickel announced its intention to tokenize palladium market. The platform will help to increase the liquidity on the market.

If we talk about the criteria of which assets are most suitable for the tokenization, we can highlight these 4:

1. There is a demand for this type of asset on the market.

2. It is currently hard to transfer the ownership rights for this type of asset.

3. An asset can be "split" into several hundred or thousands of pieces (tokens), and each of these pieces (tokens) will have an economic value.

4. The asset is an independent, in the economic and legal sense. So as an asset, it can be separated from other assets and sold to a third party.

Can we tokenize the assets in Russia?

In 2019 amendments were adopted to the Civil Code of the Russian Federation. Under the new article 141.1 of the Civil Code of the Russian Federation, the rights and obligation can be represented as digital rights. So the transfer of the digital rights from one person to another would be sufficient and recognizable by the law. However, the Civil Code also says that special legislation will identify which rights can be digitalized. For now, there is no special legislation on this.

It is also should be noted that it will be hard to tokenize some of the assets because of different requirements on how property must be transferred. For example, tokenization of ownership of real estate requires the state registration of such a right (Article 42 of the Federal Law "On State Registration of Real Estate"). So each deal with a token must be registered in the public registry.

So what if we tokenize ... our reputation?

Today, when people say "reputation is paramount," is it possible to make money from this, by tokenizing your reputation directly?

Currently, the concept of "goodwill" is not enshrined in Russian law. Legal entity and a citizen can both have a business reputation. According to the order of the Ministry of Finance, the business reputation of an enterprise is an asset for the accounting process. However, the business reputation is inherently connected with the activity of the person (a financial situation, public opinion, etc.), and you can not divide your activity from a business reputation. Also, under Article 150 of the Civil Code of Russia, business reputation is an inalienable and indescribable non-material benefit. Accordingly, it is impossible to tokenize and sell business reputation.

However, you can tokenize the image of yourself of the company if you register your trademark. Name of the person, a picture of the person, company name, etc. may be registered as a trademark (Art. 1482 of the Civil Code of the Russian Federation). In this case, the trademark may be transferred for use under a license agreement (Art. 1489 of the Civil Code of the Russian Federation) and be sold (Art. 1448 of the Civil Code of the Russian Federation).

So, you can tokenize your public image. The only question is, do you have a buyer for it?