XBRL US and ConsenSys have formed a working group to develop standards for the tokenization of assets on blockchain.
XBRL US is an industry consortium that helps standardize the use of XBRL, a data-tagging language for financial information. ConsenSys is a blockchain technology company.
The blockchain is a digital distributed ledger that records and facilitates transactions, and is highly ecrypted and secure. Tokens are digital representations of an asset that could be debt, equity, cash or a physical asset (e.g. a vehicle or a piece of artwork). Tokens map accounts assets and maintain a record of ownership. They are used on a blockchain to assign ownership and rights of underlying assets that are transacted through smart contracts (digital contractual agreements) on the blockchain.
The newly formed working group aims to establish a standardized method to represent a token across all blockchain networks in order to eliminate transactional friction and reduce processing costs; enable automation and provenance tracking; and allow interoperability of transactions on a global scale.
“We envision a future where all asset classes are tokenized, and act as bearer instruments that are facilitated and recorded on the blockchain,” stated Griffin Anderson, director for blockchain accounting at ConsenSys and founding member of the Accounting Blockchain Coalition.
“Blockchain is the future for financial products and financial transactions”, said Campbell Pryde, president and CEO of XBRL US, in a statement. “Creating a standard method to tokenize transacted assets is necessary to communicate ownership and value. Without standardization, the speed, accuracy and automation promised by smart contracts on the blockchain, simply will not happen.”
The working group plans to establish goals and action steps by early 2017. The group asks for input from technology, finance and accounting representatives on developing tokenization standards that can be used worldwide, for all asset classes. Those wishing to participate can contact Michelle Savage at XBRL.
Technology editor for Accounting Today.