Africa is a continent of immense potential, but also of immense challenges. Many of its people lack access to basic services, such as education, health care, and financial inclusion. Many of its resources, such as land, minerals, and wildlife, are exploited by foreign interests or corrupted elites. And, most of its markets, such as agriculture, manufacturing, and tourism, are hampered by inefficiencies, barriers, and risks.

But what if there was a way to transform these challenges into opportunities? What if there was a way to unlock the value of Africa’s assets and empower its people to participate in the global economy? What if there was a way to create a more inclusive, transparent, and sustainable future for Africa?

That is the promise of tokenization.

Tokenization is the process of converting any asset into a digital token that can be stored, transferred, and traded on a blockchain network. A blockchain is a distributed ledger that records transactions in a secure, verifiable, and immutable way. By tokenizing assets, we can create new forms of ownership, exchange, and investment that are more liquid and accessible than ever before.

Tokenization is not a new concept. It has been used for years to create digital currencies, such as Bitcoin and Ethereum, that can be used as alternatives to fiat money. But tokenization can also be applied to other types of assets, such as real estate, art, commodities, intellectual property, debt, and so on. These are called tokenized assets.

Advantages of tokenized assets

Tokenized assets have many advantages over traditional assets. They can be:

• More liquid: Tokenized assets can be divided into smaller units and traded on global platforms at any time, without intermediaries or friction. This increases the market size and liquidity of the assets, making them more attractive to investors and buyers.

• More accessible: Tokenized assets can be accessed by anyone with an internet connection and a digital wallet, regardless of their location or status. This lowers the barriers to entry and creates new opportunities for inclusion and participation.

• More transparent: Tokenized assets can be tracked and verified on the blockchain, ensuring their authenticity and provenance. This reduces the risks of fraud, corruption, and manipulation.

• More efficient: Tokenized assets can be managed and governed by smart contracts, which are self-executing agreements that run on the blockchain. This eliminates the need for intermediaries and bureaucracy, saving time and costs.

• More innovative: Tokenized assets can be combined and customized to create new products and services that meet the needs and preferences of the users. This fosters creativity and innovation.

Tokenization in other parts of the world

Tokenization is not a fantasy. It is already happening in different parts of the world. For example:

• In France, a company called Equisafe has tokenized a historic building in Paris, allowing investors to buy shares of the property using digital tokens.

• In Switzerland, a company called Daura has tokenized shares of small and medium-sized enterprises, enabling them to raise capital from investors using digital tokens.

• In Singapore, a company called iSTOX has tokenized various types of securities, such as bonds, funds, and private equity, allowing investors to trade them on a regulated platform using digital tokens.

Tokenization in Africa

But tokenization is not only happening in developed countries. It is also happening in Africa. And it has the potential to transform the continent in unprecedented ways.

There is a growing interest from investors in tokenized assets in Africa. This is due to the potential of tokenization to make assets more liquid and accessible, as well as the potential for higher returns. Some of these assets include:

• Real estate: Africa has a huge demand for affordable housing, but also a huge supply gap. According to the World Bank, there is a shortage of 56 million housing units in Africa, which is expected to grow to 100 million by 2025. Tokenizing real estate can help bridge this gap by allowing developers to raise funds from investors using digital tokens that represent fractional ownership of the properties. This can also enable homeowners to unlock the value of their homes by selling or borrowing against their tokens. Moreover, tokenizing real estate can create more transparency and efficiency in the market by reducing transaction costs and delays.

• Art: Africa has a rich and diverse artistic heritage, but also a lack of recognition and appreciation. According to UNESCO, Africa accounts for only 1% of the global art market share. Tokenizing art can help change this by allowing artists to reach a wider audience and monetize their work using digital tokens that represent ownership or royalties of their artworks. This can also enable collectors to diversify their portfolios and access new markets by buying or selling their tokens. Furthermore, tokenizing art can create more authenticity and provenance in the market by verifying the origin and history of the artworks.

• Commodities: Africa has a vast and varied natural resource base, but also a lot of volatility and vulnerability. According to the African Development Bank, Africa accounts for 30% of the world’s mineral reserves, 10% of the world’s oil reserves, and 8% of the world’s natural gas reserves. Tokenizing commodities can help stabilize this by allowing producers to hedge their risks and secure their revenues using digital tokens that represent futures or options contracts of their commodities. This can also enable consumers to hedge their costs and secure their supplies by buying or selling their tokens. Additionally, tokenizing commodities can create more traceability and sustainability in the market by tracking the environmental and social impact of the commodities.

Examples of tokenized assets

These are just some examples of the tokenized assets that can be created and traded in Africa. There are many more possibilities, such as tokenizing intellectual property, debt, and so on. The potential is enormous.

But tokenization is not without challenges. There are technical, legal, regulatory, and cultural barriers that need to be overcome. For example:

• Technical: Tokenizing assets requires a robust and reliable infrastructure that can support the creation, storage, transfer, and exchange of digital tokens. This includes blockchain networks, digital wallets, smart contracts, and platforms. These technologies are still evolving and maturing and may face issues such as scalability, interoperability, security, and privacy.

• Legal: Tokenizing assets requires a clear and consistent framework that can define the rights and obligations of the parties involved in the tokenization process. This includes issuers, investors, buyers, sellers, intermediaries, and regulators. These roles and responsibilities may vary depending on the type and jurisdiction of the asset being tokenized, and may conflict with existing laws and regulations.

• Regulatory: Tokenizing assets requires a supportive and flexible environment that can enable the innovation and growth of the tokenization ecosystem. This includes policies, standards, guidelines, and oversight mechanisms that can protect the interests and rights of the stakeholders, while also fostering competition and collaboration. These rules and regulations may differ depending on the nature and purpose of the tokenized asset and may need to be harmonized across different countries and regions.

• Cultural: Tokenizing assets requires a shift in mindset and behaviour that can embrace the new opportunities and challenges of tokenization. This includes awareness, education, trust, and adoption among the various actors in the tokenization value chain. These attitudes and preferences may vary depending on the social and economic context of the asset being tokenized, and may need to be influenced by incentives and disincentives.

How to Solve the Africa-centric Tokenization Challenges

These challenges are not insurmountable. They can be addressed by leveraging the strengths and resources of Africa’s diverse and dynamic stakeholders. These include:

• Governments: Governments can play a key role in creating a conducive environment for tokenization by providing clear and consistent legal frameworks, supportive and flexible regulatory regimes, robust and reliable infrastructure, as well as incentives and disincentives for tokenization activities.

• Private sector: The private sector can play a key role in driving innovation and growth in tokenization by developing new technologies, platforms, and services for tokenization; creating new products and markets for tokenized assets; as well as investing in and supporting tokenization initiatives.

• Civil society: Civil society can play a key role in ensuring accountability and responsibility in tokenization by raising awareness and education about tokenization; advocating for the rights and interests of tokenization stakeholders; as well as monitoring and evaluating tokenization outcomes.

• Academia: Academia can play a key role in advancing knowledge and understanding of tokenization by conducting research and analysis on tokenization; providing training and capacity building for tokenization; as well as collaborating and exchanging best practices on tokenization.

• International community: The international community can play a key role in facilitating cooperation and coordination in tokenization by providing technical and financial assistance for tokenization; promoting standards and guidelines for tokenization; as well as fostering dialogue and partnership on tokenization.

These stakeholders can work together to create a vibrant and sustainable ecosystem for tokenization in Africa.

Tokenization is not a silver bullet. It is not a solution to all of Africa’s problems. But it is a powerful tool that can help unlock the value of Africa’s assets and empower its people to participate in the global economy. Tokenization is not a threat. It is not a challenge to Africa’s sovereignty or identity. But it is an opportunity to create a more inclusive, transparent, and efficient future for Africa.

Tokenization is not a dream. It is not a fantasy or a fad. But it is a reality that is happening now. And it is up to us to make it happen.