Despite recently garnering much attention, traditional exchange-traded funds (ETFs), including spot bitcoin ETFs, are still inferior to tokenized real-world assets (RWA), according to Zaid Ismail, the COO at the future-proof blockchain Mintlayer.
The Appeal of Tokenized Real-World Assets
Zaid Ismail stated that, unlike regular ETFs, trading of tokenized RWAs is not limited to normal working hours. Tokenized RWA, the blockchain-based digital tokens that represent physical and traditional financial assets, offer several advantages over ETFs. These include improved liquidity, global accessibility, real-time transactions, increased transparency, reduced costs, and direct ownership. According to Ismail, these attributes make tokenized RWAs "a more versatile and appealing choice for modern investors seeking portfolio diversification."
However, the future success of tokenized RWAs depends on global regulatory collaboration and the standardization of rules governing such assets. The involvement of traditional financial institutions in embracing this new way of handling valuable assets is also crucial for the success of tokenized RWA, Ismail added.
In an interview with Bitcoin.com News, Zaid Ismail, the COO of Mintlayer, explained why developers should consider creating decentralized finance (defi) apps on the Bitcoin network. He also shared his thoughts on common blockchain challenges such as network congestion, high transaction fees, and the difficulty of running nodes, and how these issues hinder the adoption of the technology.
Below are Zaid Ismail's answers to the questions:
Bitcoin.com News (BCN): Exchange-traded funds (ETFs) are seen by some as the closest thing the Tradfi ecosystem has to tokenized real-world assets (RWA). In what ways are the tokenized RWAs superior to typical ETFs?
Zaid Ismail (ZI): Tokenized Real-World Assets (RWAs) on the blockchain offer significant advantages over traditional ETFs. These advantages include 24/7 trading that bypasses the restricted hours of traditional exchanges, improved liquidity, worldwide accessibility, real-time transaction capability, increased transparency, reduced costs, enhanced customization options, and direct ownership. Collectively, these attributes make them a more versatile and appealing choice for modern investors seeking portfolio diversification.
BCN: As regulatory frameworks continue to evolve, how would the cross-border trading and ownership of RWAs work, especially as the Tradfi institutions are dipping their toes into the world of tokenized RWAs?
ZI: In the past few years, the cross-border trading and ownership of tokenized Real World Assets (RWAs) have become more feasible. However, as the regulatory frameworks evolve, there is a need for international cooperation and standardization to ensure smooth cross-border transactions.
Traditional finance institutions are also starting to get involved in tokenized RWAs. They are testing the waters of this new digital approach to assets and will need to work with regulators to adapt the existing regulations to the changing landscape.
The future of cross-border trading and ownership of tokenized RWAs relies on global collaboration, standardized rules, and the willingness of traditional financial players to embrace this innovative way of handling valuable assets.
BCN: Why would an asset owner want to tokenize their assets? What does tokenization change for asset originators and traders?
ZI: Although asset owners might initially perceive tokenization as a complex process, platforms like Mintlayer simplify the process, reducing hassles for asset owners. With Mintlayer, tokenization is embedded and simple, allowing non-technical users to issue tokens easily without the need for deployer contracts like on Ethereum.
Mintlayer Institutional is also building a SaaS platform for institutional clients that simplifies the process of issuing, monitoring, and dealing with compliance aspects required for tokenization.
Tokenization offers several benefits that significantly outweigh the initial learning curve and effort. It enhances liquidity, allows fractional ownership for high-value assets like real estate or art, offers global market access, transparent transactions via blockchain, and efficient asset management with smart contracts. Tokenized assets provide a stable and accessible investment avenue for investors, especially in high-inflation regions, revolutionizing asset origination and trading.
BCN: With blockchains still facing congestion, transaction fee spikes, and difficulty in running nodes, is the blockchain infrastructure ready for the tokenization of real-world assets at scale?
ZI: The current state of blockchain infrastructure, particularly with layer
Frequently Asked Questions
Are gold investments a good idea for an IRA?
For anyone who wants to save some money, gold can be a good investment. It is also an excellent way to diversify you portfolio. But gold is not all that it seems.
It has been used as a currency throughout history and is still a popular method of payment. It’s often referred to as “the world’s oldest currency.”
But gold, unlike paper currency, which is created by governments, is mined out from the ground. That makes it very valuable because it’s rare and hard to create.
The supply and demand for gold determine the price of gold. The strength of the economy means people spend more, and so, there is less demand for gold. The result is that gold’s value increases.
On the flip side, people save cash for emergencies and don’t spend it. This causes more gold to be produced, which lowers its value.
This is why investing in gold makes sense for individuals and businesses. You will benefit from economic growth if you invest in gold.
Your investments will also generate interest, which can help you increase your wealth. Plus, you won’t lose money if the value of gold drops.
What is the best precious metal to invest in?
This question is dependent on the amount of risk you are willing and able to accept as well as the type of return you desire. Gold is a traditional haven investment. However, it is not always the most profitable. For example, if your goal is to make quick money, gold may not suit you. If you have time and patience, you should consider investing in silver instead.
If you don’t care about getting rich quickly, gold is probably the way to go. If you want to invest in long-term, steady returns, silver is a better choice.
Do You Need to Open a Precious Metal IRA
Precious metals are not insured. This is the most important fact to know before you open an IRA account. It is impossible to get back money if you lose your investment. This includes any loss of investments from theft, fire, flood or other circumstances.
Protect yourself against this type of loss by investing in physical gold or silver coins. These items have been around thousands of years and are irreplaceable. They are likely to fetch more today than the price you paid for them in their original form.
If you decide to open an IRA account, choose a reputable company that offers competitive rates and products. It’s also wise to consider using a third-party custodian who will keep your assets safe while giving you access to them anytime.
Do not open an account unless you’re ready to retire. Do not forget about the future!
Is buying gold a good way to save money for retirement?
Although gold investment may not seem appealing at first glance due to the high average global gold consumption, it’s worth considering.
Physical bullion bar is the best way to invest in precious metals. However, there are many other ways to invest in gold. The best thing to do is research all options thoroughly and then make an informed decision based on what you want from your investments.
If you don’t need a safe place for your wealth, then buying shares of mining companies or companies that extract it might be a better alternative. If you need cash flow to finance your investment, then gold stocks could be a good option.
ETFs allow you to invest in exchange-traded funds. These funds give you exposure, but not actual gold, by investing in gold-related securities. These ETFs usually include stocks of precious metals refiners or gold miners.
What are the benefits of a Gold IRA?
The best way to save money for retirement is to place it in an Individual Retirement Account. It’s not subject to tax until you withdraw it. You have complete control over how much you take out each year. There are many types available. Some are better suited for people who want to save for college expenses. Some are better suited for investors who want higher returns. Roth IRAs are a way for individuals to make contributions after the age of 59 1/2, and then pay taxes on any earnings upon retirement. The earnings earned after they withdraw the funds aren’t subject to any tax. This account is a good option if you plan to retire early.
The gold IRA allows you to invest in different asset classes, which is similar to other IRAs. Unlike a regular IRA you don’t need to worry about taxes while you wait for your gains to be available. People who prefer to save their money and invest it instead of spending it are well-suited for gold IRAs.
Another benefit to owning IRA gold is the ability to withdraw automatically. This means that you don’t need to worry about making monthly deposits. To avoid missing a payment, direct debits can be set up.
Finally, gold is one the most secure investment options available. Because it’s not tied to any particular country, its value tends to remain steady. Even in times of economic turmoil gold prices tend to remain stable. Gold is a good option for protecting your savings from inflation.
What is the tax on gold in Roth IRAs?
The tax on an investment account is based on its current value, not what you originally paid. If you invest $1,000 into a mutual fund, stock, or other investment account, then any gains are subjected tax.
If you place the money in a traditional IRA, 401(k), or other retirement plan, there is no tax when you take it out. Taxes are only charged on capital gains or dividends earned, which only apply to investments longer than one calendar year.
The rules that govern these accounts differ from one state to the next. In Maryland, for example, withdrawals must be made within 60 days of reaching the age of 59 1/2 in order to qualify. Massachusetts allows you to delay withdrawals until April 1. New York offers a waiting period of up to 70 1/2 years. To avoid penalties, you should plan ahead and take distributions as soon as possible.
How much money should I put into my Roth IRA?
Roth IRAs allow you to deposit your money tax-free. The account cannot be withdrawn from until you are 59 1/2. There are some rules that you need to keep in mind if you want to withdraw funds from these accounts before you reach 59 1/2. First, you cannot touch your principal (the original amount deposited). No matter how much money you contribute, you cannot take out more than was originally deposited to the account. If you wish to withdraw more than you originally contributed, you will have to pay taxes.
The second rule states that income taxes must be paid before you can withdraw earnings. So, when you withdraw, you’ll pay taxes on those earnings. Let’s take, for example, $5,000 in annual Roth IRA contributions. Let’s also say that you earn $10,000 per annum after contributing. You would owe $3,500 in federal income taxes on the earnings. This leaves you with $6,500 remaining. This is the maximum amount you can withdraw because you are limited to what you initially contributed.
Therefore, even if you take $4,000 out of your earnings you still owe taxes on $1,500. You’d also lose half the earnings that you took out, as they would be subject to a second 50% tax (half of 40%). So, even though you ended up with $7,000 in your Roth IRA, you only got back $4,000.
There are two types of Roth IRAs: Traditional and Roth. A traditional IRA allows you to deduct pre-tax contributions from your taxable income. You can withdraw your contributions plus interest from your traditional IRA when you retire. There are no restrictions on the amount you can withdraw from a Traditional IRA.
Roth IRAs do not allow you to deduct your contributions. But once you’ve retired, you can withdraw the entire contribution amount plus any accrued interest. There is no minimum withdrawal amount, unlike traditional IRAs. You don’t need to wait until your 70 1/2 year old age before you can withdraw your contribution.
Statistics
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item’s value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
External Links
wsj.com
- Saddam Hussein’s InvasionHelped Uncage a Bear In 90 – WSJ
- How do you keep your IRA Gold at Home? It’s not legal – WSJ
cftc.gov
finance.yahoo.com
investopedia.com
How To
Tips for Investing Gold
Investing in Gold is a popular investment strategy. There are many benefits to investing in gold. There are several options to invest in the gold. Some people prefer to buy gold coins in physical form, while others prefer to invest in gold ETFs.
Before you buy any type of gold, there are some things that you should think about.
- First, verify that your country permits gold ownership. If you have permission to possess gold in your country, you can then proceed. Or, you might consider buying gold overseas.
- The second is to decide which kind of gold coin it is you want. You can choose between yellow gold and white gold as well as rose gold.
- You should also consider the price of gold. Start small and move up. You should diversify your portfolio when buying gold. Diversifying assets should include stocks, bonds real estate mutual funds and commodities.
- Lastly, you should never forget that gold prices change frequently. Be aware of the current trends.
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By: Terence Zimwara
Title: Tokenized Real-World Assets: A Diversification Strategy for Modern Investors
Sourced From: news.bitcoin.com/tokenized-real-world-assets-an-appealing-portfolio-diversification-strategy-for-modern-investors-zaid-ismail/
Published Date: Mon, 15 Jan 2024 12:30:29 +0000
