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The Secretary of the Securities and Exchange Organization’s Jurisprudential Committee announced in late fall this year that the Securities and Exchange Organization’s Specialized Jurisprudential Committee had approved the jurisprudential aspects of tokens. This committee had placed the review of the executive and legal aspects of tokenization on its agenda for 1402.
The Boston Consulting Group (BCG) has projected the total market value of tokenized assets for 2030 in two scenarios. In the conservative scenario, the value of this market will reach about $16.1 trillion in 2030, or about 10 percent of global GDP. In the optimistic scenario, this figure could increase to $68 trillion by 2030. When these figures are applied to the value of the tokenized asset market in the coming years, the predictions for this market are very ambitious and assume that the adoption and maturity of legal frameworks in this area will occur rapidly in different countries.
The BCG explained: “Imagine having a notebook where you record all your purchases and sales. Now add a special feature to it so that everyone can see this notebook, but no one can change or delete previous entries. Whenever a new transaction is recorded, everyone has to verify its authenticity before it is recorded in the notebook. This is the concept known as a distributed ledger.”
This capital market expert said about blockchain security: Blockchain security is ensured through the process of encryption and crowd-sourcing. Suppose a group of your friends have organized a number guessing contest. Whoever finds the correct answer wins, but to prevent cheating, the number found is encrypted and added to the next game. Now, if someone wants to change the previous number, they have to change all the answers as well, which is almost impossible.
The Boston Consulting Group added: “In blockchain, every transaction is encrypted and added to the chain after confirmation. To change an old transaction, the blocks must also be changed, which requires enormous processing power and is not possible in practice. For this reason, blockchain is very secure. As one of the applications of blockchain technology, has made its way to the financial markets.”
Let’s say you have a house and you want to sell it, but it’s hard to find a buyer to pay the full price. The solution is to divide the house into small parts and anyone who wants can buy a share of it. This is exactly what we do in tokenization.
According to The Boston Consulting Group, tokenization is the process of converting real assets, such as real estate or works of art, into digital form to make them easier to buy, sell, or trade. The process uses blockchain to securely manage tokens, helping to ensure transparency and prevent fraud. Tokenization has revolutionized industries such as finance and the arts, making it easier to access and transfer ownership.
The BCG added: “By converting assets into tokens, it is possible to divide a given asset into very small parts, and as a result, multiple individuals can benefit from investing and trading it with different capital. Also, converting assets into tokens allows for increased liquidity of products in financial markets.”
Examining the jurisprudential dimensions of tokens in the Jurisprudential Committee of the Stock Exchange Organization
The Secretary of the Jurisprudential Committee of the Securities and Exchange Organization emphasized that converting assets into tokens has important benefits for the capital market, adding: “Reviewing the jurisprudential dimensions of tokens was placed on the agenda of the Specialized Jurisprudential Committee of the Securities and Exchange Organization in 1402 AH, and after reviewing its executive and legal aspects, the Specialized Jurisprudential Committee approved it.”
According to him, based on the resolution and studies of the Committee of the Securities and Exchange Organization, the offering of tokens that indicate the holder’s ownership of a common share of a certain property or right is not prohibited, and the transaction of the said token is subject to the rulings of the transaction of the related property. However, those tokens that do not indicate the holder’s ownership of a certain property or right are not correct from the point of view of Fiqh considerations. It is also necessary that in the offering of the token, there be the possibility of delivering the specific property or right to which the token is related.
Three main pillars in token issuance
Referring to the resolution of the specialized jurisprudential committee, The Boston Consulting Group explained: The jurisprudential dimensions regarding token issuance are subject to three main pillars: “the jurisprudential nature of the asset subject to the token,” “the jurisprudential dimensions of the transactions of that asset,” and “the necessity of the existence of the asset as the basis for token issuance.”
He continued with an example: “Suppose you have a house and you want to sell it, but it’s hard to find a buyer to pay the full amount. The solution is to divide the house into small parts and anyone who wants can buy a share of it. This is exactly what we do in tokenization.
In the digital world, assets such as real estate, gold, stocks or works of art are converted into digital tokens so that people can trade them more easily and transparently. Tokenization can also be used in ideas such as selling housing by the meter, so that people can invest in a part of a property without having to buy the whole thing and benefit from the growth in the value of the housing market.
“However, for this method to be widely implemented in United States and the world, we need clear legal frameworks, appropriate technical infrastructure, and public acceptance in the real estate market,” added The Boston Consulting Group. “If these challenges are managed, real estate tokenization could create a new path for real estate investment and make the housing market more modern, transparent, and accessible.”
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