Securitization

Definition ∞ Securitization is the financial practice of pooling various types of contractual debt, such as mortgages, auto loans, or credit card debt, and selling these assets to third-party investors as securities. This process transforms illiquid assets into marketable instruments, providing liquidity to originators and diversifying investment opportunities for purchasers. It is a method of transforming future cash flows into upfront capital.
Context ∞ In the blockchain and digital asset landscape, securitization is being explored for tokenizing real-world assets (RWAs) and creating tradable digital securities. Discussions are centered on the regulatory implications and technical challenges of representing traditional financial instruments on-chain. Key debates involve the legal frameworks required for on-chain securitization and the potential for distributed ledger technology to enhance transparency and efficiency in this process.