Tokenization is a buzzword that's been a decade in the making

Digitize it
In the summer of 2015 I went to a small event hosted by a firm I wasn't familiar with, in the One Liberty Plaza skyscraper in downtown Manhattan, next to Zuccotti Park where the Occupy Wall Street movement had erupted a few years earlier. The firm had been gifted the conference room for the presentation; I can't remember whose office space it was offhand, but it was a recognizable Wall Street name.

What they were demo'ing was a new kind of platform for debt issuance. They showed a website that had a bunch of fields on it, for the details of a debt issuance. All the operator had to do was fill in the fields – details such as the total amount, coupon, yield, maturity – hit send, and they were done. It was like buying something on Amazon. I remember as I watched this thinking that I was seeing a fundamentally new thing. They were using the technology behind bitcoin to create a new infrastructure for securities.

It took a while, but that basic idea is starting to find its way into the real world. Neuberger Berman on Tuesday announced that it was issuing a junk-bond fund using tokenized securities, as our Penny Crosman wrote. And the firm that was helping it do this, Securitize, is the firm that put on that demo I saw a dozen years ago.

The process for issuing this fund sounds different from what I saw that day downtown, but the concept is essentially the same. Securities recorded digitally on a digitized ledger. Everything is recorded on a platform that is automatic and transparent. It should lead to easier record-keeping and reconciliation, settlement, custody and transfer. Lower costs, lower friction. I've been saying for the past five or so years that I expected the financial system would be rewired and digitized along the lines of something blockchain-based. It looks like that is finally happening for real. 

But don't get too hyped up. What Neuberger is doing may be real, but it still feels kind of proof-of-concept. There will be so many logistical challenges to upgrading the existing financial plumbing. As many of you know, just switching core providers can be a decade-long project. I can't imagine the intricacies of moving off COBOL-based systems. I don't know if it's even possible.

Banks are already invested in this technology, but are mindful of the risks, as our Jasmine Ni wrote on Tuesday. "Having to reconcile three platforms is probably a newer concept for banks. Making sure that you have the appropriate controls in place if there are failures within that process has been a key focus of ours," said Tara Edmonds, senior vice president and enterprise payments strategy leader at SouthState Bank.

Still cooking
Lisa Cook is a governor on the Federal Reserve board. Donald Trump does not want Cook to be a governor on the Federal Reserve board. As Donald Trump also happens to be president of the United States, this has become an issue.

I know, I know. You're aware. Of course this has been an ongoing issue for months now. The president is trying to fire Cook. Cook is resisting, arguing he has no legal justification for doing so. The courts have so far been on her side. Trump is not giving up. Our Kyle Campbell explains where exactly this all stands right now, and where it is likely to go. 

Cook has not been charged with any crime that would justify her ouster. Bill Pulte, Trump's director of the Federal Housing Finance Agency, has alleged that Cook committed mortgage fraud, but she has not been charged, much less convicted. To get around this lack of grounds, Trump is turning to an obscure precedent last used by President William H. Taft (27th president, served from 1909 to 1913 if you have to look it up as I did ) that would allow the president to fire any executive officer for any reason he chooses.

It makes sense that Trump, whose major economic initiative in this administration has been tariffs, a tool that hasn't been used in a century, would turn to a legal maneuver that hasn't been used in a century to try and fire Cook.