The Federal Reserve stated in a working paper on tokenization on September 8 that tokenization is a new and rapidly growing financial innovation in the encryption market, which will be analyzed from three perspectives: scale, advantages and risks. First, the concept of tokenization is introduced, which is the process of building digital representations (encrypted tokens) for non-encrypted assets (underlying assets). In the process, tokenization creates a link between the crypto-asset ecosystem and the traditional financial system. At sufficient scale, tokenized assets may transfer the risk of severe volatility from the crypto market to the underlying asset market of traditional finance.