Transcription
Tokenization converts assets into digital representations on a blockchain. It's promoted by institutions such as BIS and Black Rockck. It promises liquidity, fractional ownership, and broader access to markets from real estate right through to precious metals.
While it's marketed as democratizing investment, the super rich are unlikely to embrace it. Tokenization abstracts true ownership by converting tangible legal claims into digital tokens, meaning control over the asset now depends on platforms, intermediaries, or custodial approvals rather than the owner's direct authority. Even if you own it digitally, any transfer, sale, or use typically requires adherence to platform rules or regulatory checks. This replaces direct control that you have when you move a physical gold bar or sell real estate in your name. You now have intermediated authority. Holdings are also visible on public or semi-public ledgers, reducing privacy and discretion, while participation is subject to oversight, platform requirements, and transactional frictions.
Thus, unsurprisingly, the super rich will seek to avoid tokenization. Consequently, I believe it's really important for people to understand the potential risks of tokenization and the ways in which the super rich may seek to avoid what appears to be a pervasive process. So, I hope this video offers some valuable insights and importantly food for thought. Of course, none of it constitutes financial advice, so please do your own research.
So, I've considered the following asset classes in the table, which highlights likely super rich strategies versus those that will be likely adopted uh or accepted rather by the common man. And I'll put this as a PDF on my Substack page. So, the link will be below.
First, let's consider real estate. The super rich will likely use legal structures like trusts and offshore LLC's to maintain privacy and control over real estate, avoiding tokenization unless it benefits them explicitly. Jurisdictional arbitrage will be exploited by the more sophisticated. Meanwhile, ordinary investors may be nudged towards tokenized platforms for liquidity and fractional ownership, sacrificing discretion and autonomy. Here tokenization will be rolled out gradually and selectively and likely targets will be new developments that can be more easily tokenized while existing homeowners may in time be offered preferential rates, lower fees and so on to incentivize tokenizing their homes.
For the oligarchic class, high value jewelry, art, and collectibles will be stored in private vaults or free ports, exchanged privately, and rarely tokenized unless there is a strategic advantage such as wishing to raise capital, adjust risk, or enable discrete fractional transfers. Ordinary collectors, however, may buy fractionalized or tokenized pieces through digital platforms. While this provides some market participation, true ownership and influence over any major works will likely remain inaccessible, reinforcing the divide between the elite and retail collectors.
Plausibly, the super rich will hold equities and private companies through offshore vehicles, dualclass share structures, and private equity arrangements. Tokenization makes ordinary investors carry the costs, risks, and restrictions while the wealthy keep the privacy, control, and the upside. It shifts operational, regulatory, and financial risks onto ordinary investors who will face high fees, limited control, and platform dependency. While the super rich retain privacy and direct authority over their assets, ordinary investors will likely be offered tokenized investment vehicles, promising access to exclusive deals, but these in time may well carry higher fees, give little control over the asset, and expose them to market fluctuations and that platform risk.
Once again, currently offshore entities are used to register luxury items such as yachts, jets, and high-end vehicles, and this once again seems unlikely to change much for the ultra wealthy. This helps to keep trades private and will avoid tokenization. It would seem that land, mines, and energy rights are similarly buried under corporate shells, trusts, or exempt jurisdictions. Retail investors may be able to purchase tokenized fractions of these assets, but meaningful control remains with the elite. So, what we're likely seeing is selective exposure, which illustrates how tokenization can appear to democratize markets while leaving real decisionmaking in the hands of the oligarchy.
When it comes to precious metals, they will obviously be held in private vaults, offshore accounts, or through unregulated bullion dealers by all sensible individuals. Tokenized gold, ETFs, and blockchainbased representations will almost certainly be avoided by the ultra wealthy, ensuring privacy and physical custody. Cash and bonds follow similar patterns stored in private banks or held directly in sovereign debt. For Joe public, however, he'll be guided towards tokenized stable coins, ETFs, and digital bonds, which provide price exposure but limit discretion and subject participants to tracking, reporting, and regulatory oversight. Tokenization offers a long-term pathway towards regulatory capture.
As we discussed previously here, once again, astute individuals will store cryptocurrencies in cold storage, multi- signature wallets, or via private over-the-counter deals, avoiding mass market tokenized products or custodial platforms that can be traced. Similar to gold tokenization, they offer price exposure but are accompanied by platform risk. Moreover, they may place particular emphasis on privacy coins such as Monero to conduct private cashbased transactions.
Now, the picture I seem to have painted here is one where the behavior of the super rich will be largely unaffected. But there are some key lessons that we can all take away here. First, the super rich are likely to prioritize keeping assets offchain and out of public view. Second, they maintain direct ownership rather than relying on platforms, spreading their holdings across diverse asset classes to manage risk. Third, they engage with tokenization only when it provides a clear advantage. For instance, in terms of generating finance. Fourth, ordinary investors should research appropriate ownership structures and custody options to protect their assets in an increasingly tokenized world.
There is an enormous gap in the market here for legal experts who can offer advice regarding the emergence of tokenization, digital identity, and related blockchain technologies. It's also important to recognize that rules, regulations, and practical options will vary across different jurisdictions. This will affect what strategies are actually feasible for different individuals. Of course, where we can win is really in the margins. We may not be members of the oligarchy, but we can understand the nature of the game and ensure that we learn and adapt accordingly.
Now, don't forget the table that's linked below on the Substack page, but we need to make sure that we take the lead here and be the change that we want to see in the world. Now, I hope this has been useful. Thanks so much for joining me, and I look forward to seeing you next time. for Mike.