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For Banks, Asset ‘Tokenization’ Holds Promise, Poses Risk

Digital "tokenized" assets under development at seven federally insured banks and already in use at the world's largest investment platform may pose new fraud- and cyber-related risks to financial institutions that adopt them, according to technical and legal analysts. The technology, which functions similarly to cryptocurrency and non-fungible tokens but is distinct from both, involves encoding real-world assets such as securities, deposits or physical possessions as digital tokens governed by "smart contracts," and storing them on a blockchain or other distributed ledger shared between two or more banks. Tokenization promises to reduce the time banks require to clear and settle...

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