In the digital era, trust and legality play a fundamental role in every aspect of our lives.
Whether in financial transactions, identity management, or the protection of personal data, trust and legality are essential for the development of our activities, especially in business. As part of this wave, tokenization has emerged as a key technology for significant improvements in the digital world.
But what is ‘tokenization’?
In simple terms, it involves the process of converting valuable information, such as personal data or financial assets, into unique and secure digital tokens. These tokens can represent real or virtual assets stored in a decentralized ledger, such as blockchain. Tokenization, in this sense, is the result of this conversion for better storage and safeguarding. However, it does not imply that tokenization is necessary, but it may suggest that it is convenient in some cases.
Tokenization is an investment in transparency
One of the most obvious benefits of tokenization is the improvement in data and asset security. Tokens are difficult to counterfeit or manipulate due to the encryption technology involved in their creation, providing users with greater confidence in the integrity and authenticity of the data or assets they represent. Furthermore, decentralized tokenization, as seen in public blockchains, is resistant to government or corporate censorship, allowing individuals to trust that their digital assets and data won’t be manipulated or restricted by third parties. Additionally, tokenization eliminates the need for costly intermediaries in various transactions. By promoting secure and direct peer-to-peer transactions, costs are reduced, and efficiency is increased, strengthening financial and commercial systems.
In line with this, tokenization brings transparency to data and transaction records. Since every token movement is recorded on a blockchain, precise and continuous tracking and auditing become possible, which is especially valuable in financial transactions and supply chain management, where visibility and traceability are essential. Moreover, tokens can be configured to allow controlled access to the information or assets they represent, meaning only authorized parties can view or interact with the tokens. Another aspect to highlight, related to this, is that tokenization can aid in the prevention of fraud and financial crimes by making transactions more transparent and traceable, benefiting both businesses and legal authorities in detecting and avoiding illegal activities.
Legality and Tokenization
Regarding the legal aspect, tokenization can simplify regulatory compliance in various fields. This is because the ability to track transactions and assets accurately facilitates reporting and auditing, as mentioned earlier, helping companies comply with government regulations and local and international laws. In the case of smart contracts, which automatically execute when predefined conditions are met, they can be executed through tokenization, simplifying and expediting legal and contractual processes, reducing costs, and increasing efficiency in agreement execution.
Another area where tokens are implemented is fractional ownership of assets, such as real estate or artwork, making investment and participation in assets that were previously inaccessible to many people easier. At the same time, tokenization improves the liquidity of such assets as they can be easily transferred and traded on secondary markets. In the specific case of digital art, tokenization can provide greater protection for intellectual property since digital art or copyright can be represented by tokens, making it easier to track ownership and receive proper compensation for the use of such assets.
The BACS proposal
Tokenization has proven to be a revolutionary technology that significantly enhances trust and legality in the digital world. By providing greater security, transparency, control, and efficiency, tokenization has become a key enabler for a wide range of applications, from financial transactions to identity management and personal data protection. However, in this landscape, there is still a shortage of professionals capable of addressing the sector’s needs, perhaps because most digital world proposals have focused on fungible tokens, while the challenge now is tokenizing real assets, which requires legal support.
However, the legal solutions currently available are not yet sufficient to address this type of technology because our legal systems have been designed to resolve conflicts arising from hierarchical and centralized organizations, while the dynamism of the digital sector has the sign and momentum of private initiative, more horizontal and decentralized in nature.
To address this, there is Blockchain, Arbitration and Commerce Society (BACS), which is based on the new legal framework created by the community and aims to provide legal support for these new proposals. For example, what role does a registrar play in a tokenized property? What role does a commercial registry play in a tokenized commercial society? In this scenario, present regulations often fall short in the face of technological expansion in our daily activities. We are dealing with a new technology that, while changing our usual businesses, is demanding a new legal framework.
So, what is BACS? It is an association of private law and commerce, legally constituted and formed by community members to promote businesses and resolve internal conflicts. Through an association of members from the legal and technological environment, it offers training in this new technology, networking, audits, and a quality seal. BACS also has the first specialized Arbitration Court internationally recognized, whose awards are enforceable.
Therefore, BACS aims to generate a digital legal community with lawyers, companies, entrepreneurs, lawyers, and arbitrators (judges) who, respecting the private and autonomous law that arises in the digital space, resolve the private conflicts that arise from them. Because it is certainly not very coherent to leave the resolution of private and autonomous law conflicts in the hands of central authorities. Would a state court resolve a conflict of tokenization of an inheritance right issued in an ERC20 token on the Ethereum network? Could a judge understand that a DAO has breached an agreement adopted by a governance token vote? But what is more serious, is a hierarchical and centralized structure capable of resolving private law conflicts based on decentralization? Without denying the need for those structures that have traditionally been part of the materialization of law, it should not be forgotten that new demands await innovative solutions.
As technology continues to evolve, we are likely to see an increase in its adoption around the world, leading to a more reliable and legally sound digital environment.
And to make that process more passable, BACS is at your service.
