Asset Tokenization: A blockchain Solution to Financing Infrastructure in Emerging Markets and Developing Economies

27 Pages Posted: 3 May 2021

See all articles by Yifeng Tian

Yifeng Tian

University of Florida

Peter Adriaens

The Stephen M. Ross School of Business at the University of Michigan

R. Edward Minchin

University of Florida

Charles Chang

Fudan University

Zheng Lu

Columbia University

Chaoying Qi

Fudan University

Date Written: July 1, 2020

Abstract

Infrastructure is essential to alleviate poverty and generate long-term growth in emerging markets and developing counties (EMDEs). Nevertheless, financing of infrastructure in EMDEs is faced with pressure on increasing government deficits, issues of transparency, and high financing cost, as well as the lack of performance tracking under the current financial system. This paper explores the potential of tokenization to improve the efficiency of public finance and to mobilize broader private sources to bridge the widening infrastructure gap. Tokenization would elevate the private sector’s confidence and enthusiasm by improving infrastructure asset liquidity, opening access to small-scale projects, and enlarging the group of investors to participate in EMDE infrastructure development, as indicated in this research. From the EMDE governments’ perspective, administrative and financial efficiencies can be improved through automated auditing, enhanced project monitoring, and lower financing costs. Four case studies are presented to illustrate the asset tokenization process and define benefits associated with the emerging technology in the context of public finance and private finance. Regulatory and technical risks at present are identified. Implications for EMDE policymakers and international organizations, such as multilateral development banks, to initiate coordinated efforts to facilitate the widespread adoption of infrastructure asset tokenization in EMDEs are elaborated in the research. Once the potential risks and barriers for broader applications of tokenization are carefully examined and mitigated, the technology offers great potential to contribute to economic development and quality of life in EMDEs.

Keywords: infrastructure finance, blockchain, asset tokenization, public-private partnerships, emerging markets and developing economies

JEL Classification: G28, O18, H54

Suggested Citation

Tian, Yifeng and Adriaens, Peter and Minchin, R. Edward and Chang, Charles and Lu, Zheng and Qi, Chaoying, Asset Tokenization: A blockchain Solution to Financing Infrastructure in Emerging Markets and Developing Economies (July 1, 2020). ADB-IGF Special Working Paper Series “Fintech to Enable Development, Investment, Financial Inclusion, and Sustainability”, Available at SSRN: https://ssrn.com/abstract=3837703 or http://dx.doi.org/10.2139/ssrn.3837703

Yifeng Tian (Contact Author)

University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

Peter Adriaens

The Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

R. Edward Minchin

University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

Charles Chang

Fudan University ( email )

Beijing West District Baiyun Load 10th
Shanghai, 100045
China

Zheng Lu

Columbia University

3022 Broadway
New York, NY 10027
United States

Chaoying Qi

Fudan University

Beijing West District Baiyun Load 10th
Shanghai, 100045
China

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