The tokenization industry needs to address interoperability issues

Swift Strategy and Innovation Director Pallavi Thakur and BMP Paribas Asset Foundry president Julien Clausse shared their views on tokenization at the Money20/20 conference.

During their joint presentation, both Clausse and Thakur agreed that tokenization faces significant interoperability challenges that require solutions at multiple levels.

Addressing themes from his speech yesterday, Thakur noted that interoperability is a barrier to tokenization, claiming that tokenization platforms often create isolated networks or “islands” that do not inherently communicate with each other.

“Tokenization is gaining momentum and is poised to transform the securities market,” Thakur said. But he highlighted a key hurdle: “These tokenization platforms often form isolated ‘islands’ that do not naturally communicate with each other.”

These islands lead to interoperability and exist at multiple levels: the network layer (which ensures that different networks can communicate), the token format layer (which ensures compatibility of tokens across networks), and the data layer within tokens, Thakur said. It is important to address these layers for smooth operation.

Both speakers emphasized that the success of tokenization depends on overcoming the fragmented and fragmented multi-level blockchain environment.

Multi-level issues across different blockchain networks

Clausse echoed this notion of different blockchains causing these problems and emphasized the complexity of achieving true interoperability, citing various blockchain projects as the root of the problem.

“There are multiple levels, such as the network, the token format, and the data inside the tokens,” Clausse said. He claimed that the tokenization industry needs common networks and the same adoption standards.

According to Clausse, establishing industry standards across various blockchains is crucial to the future of tokenization. These standards should result from top-down consensus among industry players and practical, real-world applications.

Use cases and industry standards

Both speakers agreed on the importance of practical use cases and industry standards for the future of tokenization.

“There are multiple standards now,” Clausse said. “So everyone is trying to work to unique standards.”

Both speakers mentioned examples of industry standards below, such as Swift tokenization of small-scale renewable energy projects that can now be financed and managed more efficiently and transparently. They emphasized the need for industry collaboration and called on the crypto industry as a whole to address interoperability challenges.