Financial revolution or regression? The covert push towards a Central Bank Digital Currency through centralized asset tokenization.
In case you missed it, during a conversation with Bloomberg on January 4th, 2024, Larry Fink, the CEO of BlackRock, cast a spotlight on what he perceives as the inevitable future of finance: the tokenization of all financial assets.
We believe the next step forward will be the tokenization of financial assets, meaning that every stock and bond will have its own unique identifier and be recorded onto one general ledger. Every investor, including you and me, will have our own number or identification.
Larry Fink, CEO BlackRock
With conviction, Fink outlined a future where every stock and bond not only boasts its own unique CUSIP identifier but also finds a place on a unified digital ledger.
What is a CUSIP?
A CUSIP (Committee on Uniform Security Identification Procedures) number is a unique identification code assigned to all stocks and registered bonds in the United States and Canada. CUSIP numbers are used by brokers, dealers, clearing corporations, and depositories throughout the securities industry to support the accurate and efficient clearing and settlement of securities, as well as in reporting and record-keeping activities.
The implications of this shift are monumental, yet beneath the surface, there’s a narrative unfolding that suggests a move towards something much larger – a Central Bank Digital Currency (CBDC), albeit cloaked in the guise of modernization and efficiency.
Let’s break down Fink’s vision into simpler terms.
Imagine a world where every financial asset you own is transformed into a digital token, a kind of virtual representation that lives on a blockchain.
This isn’t just about making things digital – we’ve had digital banking for decades. No, this is about fundamentally changing the way these assets are recorded, traded, and owned.
Each of these tokens would be as unique as a fingerprint, tied to a massive, all-seeing ledger that tracks who owns what in real-time.
Here’s where the bait-and-switch scenario deepens.
By centralizing financial assets onto a single ledger, we edge closer to a system that mirrors the characteristics of a Central Bank Digital Currency.
For the uninitiated, a CBDC is a digital form of a country’s fiat currency, issued and regulated by its central bank.
The concept may sound benign or even beneficial at a glance, promising increased efficiency, reduced illicit activities, and a more inclusive financial system.
However, the shift towards a ledger-centric financial world, as posited by Fink, carries with it dystopian implications for privacy, autonomy, and control.
The adoption of a ledger-centric system, underpinned by the principles of tokenization, could be the trojan horse for CBDCs, sneaking under our radar in the guise of technological progress
A single (central or unified) ledger, particularly one with ties to or under the influence of central banking systems, could provide unprecedented oversight over individuals’ financial transactions.
This could potentially lead to a scenario where financial privacy is significantly eroded, as every transaction becomes an open book to certain eyes.
Moreover, the idea that this system could serve as a foundation for CBDCs isn’t far-fetched – even if it isn’t named or designated as a CBDC.
With assets tokenized and centralized, the leap to a government-issued digital currency that operates within this framework is short and straightforward. Such a move could herald a new era of monetary policy, where central banks have direct control over the money flowing in and out of individual wallets.
Critically, this isn’t just about what we stand to gain – instant settlements, enhanced efficiency, and the democratization of financial strategies. It’s also about what we might lose.
The adoption of a ledger-centric system, underpinned by the principles of tokenization, could be the trojan horse for CBDCs, sneaking under our radar under the guise of technological progress.
I recognize the transformative potential of tokenization and the efficiencies it can bring to the financial sector.
However, we must also be wary of the broader implications.
The path towards a single ledger system could very well be the path to a centralized digital currency, changing the face of financial privacy, autonomy, and control in the digital age.
Transcript of BlackRock CEO, Larry Fink Interview
“We believe the next step forward will be the tokenization of financial assets, meaning that every stock and bond will have its own unique identifier (CUSIP) and be recorded on one general ledger. Every investor, including you and me, will have our own number or identification. This approach could rid us of all issues surrounding illicit activities related to bonds and stocks by digitalizing them through tokenization. More importantly, tokenization allows for the customization of strategies to fit every individual. We would benefit from instantaneous settlement, considering the current costs associated with settling bonds and stocks. If everything were tokenized, transactions would be immediate, as each would simply be a line item on the ledger. We believe this represents a technological transformation for financial assets.”
“Another aspect worth discussing is voting and the choices it entails. If we know at every moment who the owner of a stock is, then when it’s time to vote, every individual owner can be identified and allowed to vote their own shares. This raises the question: Is this the end of mutual funds? While many people might consider mutual funds merely a wrapper, it’s not the end of them. However, I would argue that the dominant form of bringing products to market going forward will likely be in the form of ETFs (Exchange Traded Funds).”
Watch the Bloomberg interview with Larry Fink here:
