Citibank releases "2030 Asset Tokenization Market Outlook": 6 major trends may create a $8.2 trillion market

Author: Citi Research Institute

Compiled by: Jiahua, ChainCatcher

Six Core Judgments

The tokenization of financial assets, which means representing securities as digital tokens on the blockchain, is moving from pilot projects to operational deployment. Progress has been slow over the past few years, hindered by regulatory uncertainty, fragmented infrastructure, and a lack of on-chain settlement currencies, but is now beginning to accelerate.

Currently, the global scale of tokenized assets is approximately $17 billion, having increased about threefold in a year, with U.S. short-term debt, bonds, and money market funds accounting for over 55%, and gold and commodities making up about 34%.

By 2030, the baseline scenario is expected to reach $5.5 trillion, with a pessimistic estimate of $2.7 trillion and an optimistic estimate of $8.2 trillion, primarily driven by public market securities, while the private market remains in its early stages and faces structural constraints.

The main points can be summarized into six core judgments.

1. Growth Forecast. The baseline scenario for tokenized assets in the 2030s is $5.5 trillion, with the optimistic scenario rising to $8 trillion. Public market securities and liquid collateral, especially U.S. stocks and bonds, will drive early adoption and expand distribution to digitally native investors.

2. Liquid Assets on the Blockchain. Digitally native investors increasingly expect 24/7 access to financial assets, with stocks, bonds, and commodities likely to be tokenized. If by 2030, 10% of U.S. retail investors use on-chain solutions, the demand for tokenized U.S. stocks alone could create approximately $2.6 trillion in demand.

3. Institutional Catalysts. DTCC, NYSE, and Nasdaq are beginning to embed tokenization into their core platforms. As pilots transition to production and regulatory progress continues, the adoption by traditional financial institutions may accelerate starting in 2026.

4. Digital Currency as Core Support. Tokenized financial assets are a byproduct of tokenized cash. Regulated stablecoins and tokenized deposits can establish trust for on-chain delivery versus payment (DvP), enhancing capital efficiency and reducing settlement risk.

5. Ecosystem Coordinators (institutions that control both "asset issuance" and "on-chain settlement currency tracks") will emerge. Tokenization may create new revenue pools through programmability, composability, and vertically integrated business models, as institutions seek to control issuance, distribution, and settlement tracks to capture value, while traditional intermediaries face structural pressures.

6. Evolution, Not Revolution; Hybrid Models Dominate. The transition will be gradual, with a period of coexistence between tokenization and legacy systems, and hybrid models and interoperability between on-chain and off-chain worlds will be key to scaling.

Uneven Progress, But Direction is Set

Securities tokenization is part of a larger transformation towards programmable assets, digitally native settlement, and a more "always-on" financial system. The integration of tokenized assets and on-chain currencies points to on-chain finance: settlement, collateral management, and liquidity flows based on atomic settlement, operating in real-time and cross-border.

Institutional participation has moved beyond the experimental stage, with tokenization being used in issuance, trading, and post-trade (clearing and settlement) processes. Regulatory clarity is emerging in major jurisdictions, providing legal certainty for institutional adoption.

Evolution, Not Revolution

This transformation will not be a one-time disruption. There will not be a sudden shift from traditional markets to complete tokenization.

Adoption remains early and uneven across asset classes and jurisdictions, constrained by interoperability, legal frameworks, liquidity coordination, investor behavior, and market practices. As with previous infrastructure transitions, the benefits of tokenization will accumulate gradually rather than being realized immediately.

Institutions will integrate issuance, trading, and settlement within regulated frameworks and existing client relationships, as controlling these layers allows them to capture a larger share of the transaction lifecycle. The ability to scale will depend on interoperability, unified standards, regulatory alignment, trusted digital identities, and cross-ecosystem coordination, which will take time.

Artem Korenyuk, Head of Corporate Digital Assets at Citi's Client Business Development: Tokenization is not just technology; it is unlocking Wall Street for the digitally native generation.

Moving Towards Implementation: Five Catalysts

Tokenization is not a new concept. The 2023 report "Money, Tokens, and Games" pointed out that it can unlock trillions of value through more efficient and programmable markets.

Some early predictions were overly aggressive, projecting target markets in the tens of trillions, which in hindsight seems too optimistic. Previous waves of tokenization struggled to scale due to regulatory uncertainty limiting implementation and enforceability, limited secondary market liquidity, fragmented infrastructure, and, most critically, the absence of regulated on-chain cash.

These constraints are easing, and several independent catalysts are beginning to converge.

Blue Macellari, Head of Digital Asset Strategy at T. Rowe Price: The shift to tokenized markets is best understood through the analogy of E-ZPass electronic toll collection. We did not move to full automation overnight; first, we had two systems running in parallel, widening the road, giving separate lanes for automated and traditional traffic, increasing costs and complexity before converging. The real question is how quickly we can reach full automation.

Note: Tokenization refers to representing ownership, rights, or claims of assets as tokens on a blockchain or distributed ledger, which can be on-chain mirrors of existing assets or new assets issued natively on-chain.

These tokens embed asset attributes, ownership, transaction history, and transfer rules. In addition to digitization, tokenization introduces programmability, allowing actions such as interest payments, compliance checks, collateral management, and corporate actions to be executed automatically through smart contracts.

Catalyst 1: Increased Institutional Participation.

Asset management institutions have been creating tokenized funds for several years, and this time, the entry is at the system-level infrastructure.

DTCC is expected to receive regulatory approval by the end of 2025 to provide tokenization services for its custodial assets, with a three-year pilot program starting at the end of 2026, covering stocks, ETFs, and U.S. Treasury bonds, while retaining existing legal ownership and investor protection.

NYSE plans to launch a tokenized securities platform by the end of 2026, pending regulatory approval, aiming for 24/7 trading of U.S. stocks and ETFs, near-instant settlement, and stablecoin funding, potentially operating outside traditional clearing infrastructure. Nasdaq has received SEC approval to issue, trade, and settle certain stocks and ETFs in tokenized form while continuing to use existing clearing and settlement infrastructure.

These are not crypto-native companies pushing blockchain, but rather the oldest and largest financial institutions adopting new infrastructure, choosing to embed tokenization into core tracks rather than building parallel systems, prioritizing legal certainty and investor protection.

David Cunningham, Head of Global Institutional Business at Consensys: When DTCC and NYSE embed tokenization into capital markets, that is a turning point; what you see is the massive on-chain adoption of U.S. financial power and the global reserve currency.

Catalyst 2: On-Chain Currency Makes Native Settlement Possible.

Early tokenization relied on fiat currency tracks for settlement, which reduced efficiency. This is changing as stablecoins gain wider acceptance.

The issuance scale of stablecoins is expected to reach $1.9 trillion by 2030, with large banks also developing tokenized deposits, which could be even larger. The coexistence of both provides the liquidity foundation needed for the scaling of tokenized securities, supporting atomic DvP and continuous market operations.

On-chain currency in the U.S. will be a combination of stablecoins and tokenized deposits. In Europe, India, and mainland China, central bank digital currencies and tokenized deposits will be policy priorities rather than stablecoins.

Catalyst 3: Improved Regulatory Clarity, But It's a Double-Edged Sword.

Clearer frameworks strengthen the legal basis for institutional adoption, but progress is uneven. While clarity supports scalability and market confidence, regional rule differentiation may also fragment the market, raise compliance costs, and dilute efficiency dividends.

Europe has MiCA and DLT pilot systems, but industry feedback indicates that the scope and design of the pilots limit their effectiveness for scaling tokenized capital markets.

The U.S. SEC clarified in January 2026 the applicability of federal securities laws to tokenized securities, reaffirming technological neutrality, allowing institutions to treat tokenization as a market infrastructure issue.

The Bank of England and FCA launched a digital securities sandbox, with the FCA issuing a policy statement on fund tokenization in April 2026.

In Asia, Hong Kong has completed regulated tokenized bond issuance, and Singapore's Project Guardian has entered practical testing.

Catalyst 4: Expanded Retail Access and Evolution of Digital Brokers.

Retail brokers are enhancing awareness of on-chain securities, with some digital brokers offering tokenized U.S. stocks and ETFs to EU clients. However, current demand still primarily comes from crypto-native users. These actions are reshaping investor expectations regarding fragmented asset investments, extended trading hours, and continuous liquidity.

Solomon Tesfaye, Chief Business Officer at Aptos Labs: By 2026, the momentum for tokenizing public stocks and other liquid assets is accelerating, with exchanges, brokers, and fintech platforms converging towards 24/7 blockchain infrastructure.

Catalyst 5: Improved Market Infrastructure Maturity.

Cross-network interoperability is advancing, which is crucial for asset flows across platforms. DTCC's actions in digital asset custody, clearing, and asset movement, along with NYSE's shift towards continuous trading and near-instant settlement, are beginning to build this foundation.

From an asset management perspective, Blue Macellari pointed out in an interview that tokenization is a journey of orderly advancement, evolving from the efficiency of putting existing products on-chain to deeper transformations driven by programmability and large-scale customization, with the key prerequisite being the establishment of a broad tokenized securities library.

One of the most interesting use cases is the automation of multi-asset and target-date fund management. Historically, three major obstacles have been: transforming legacy infrastructure is less effective than natively going on-chain, a lack of widely accepted interoperability standards, and a distribution gap in reaching non-crypto-native clients. Recent popularization efforts are more likely driven by cost pressures on intermediaries and distribution platforms rather than genuine client demand.

Why Tokenization is Needed

Market participants are questioning whether existing post-trade processing and settlement models are still suitable for an always-on financial system. Today's infrastructure is capital-intensive, operationally complex, and slow to respond to changes in liquidity and balance sheet demands.

Meanwhile, investor behavior and distribution models are changing, with increasing demand to bring assets closer to investors, reaching digitally native capital pools, corporate treasury, and seeking diversification among new wealth clients.

A survey of 537 market participants shows rising expectations that DLT market structures can reduce post-trade processing costs, improve liquidity and asset movement, and enhance balance sheet efficiency. Recognition of improvements in post-trade processing costs rose from 32% in 2023 to 51% in 2025, while liquidity and asset movement increased from 34% to 43%.

Tokenization also aligns with the trend of financial markets evolving towards "always-on" operations. Investors increasingly expect continuous trading, real-time settlement, and seamless wallet-based access.

Early adoption has concentrated on scenarios with the most direct benefits, particularly in collateral and liquidity management. It may also open access and release liquidity for traditional illiquid assets such as private equity, infrastructure, and real estate.

From a value chain perspective, all parties have points of benefit.

Issuers can achieve automated treasury and dynamic financing, directly reaching investors; underwriters can reduce underwriting risk through real-time bookkeeping and create composable cross-asset structured products; trading venues can lower counterparty risk through atomic settlement; custodians can automate complex corporate actions; asset managers can reduce fund management costs and create customizable on-chain active funds; and end investors receive immutable proof of ownership and can lend tokenized securities to generate additional income.

Germán Soto Sanchez, Chief Product and Strategy Officer at Broadridge: Early evidence of tokenization scaling is already visible at the institutional level, especially in repos and collateral, but broader adoption will depend on liquidity, participation, and more aligned infrastructure and regulation.

Market Size

The current scale is approximately $17 billion, with U.S. short-term debt, bonds, and money market funds accounting for over 55%, and gold and commodities about 34%.

Third-party institutions have vastly different predictions for 2030: McKinsey estimates $1-4 trillion, Deutsche Bank Research $1.5-2 trillion, Ripple and BCG $9.4 trillion, Roland Berger $10 trillion, ARK Invest $11 trillion, and BCG with ADDX $16.1 trillion.

Most estimates cluster around $10 trillion, but the wide range itself indicates high uncertainty at this point.

Peter Bain, Chief Marketing Officer at Blockstream, believes that tokenization is only at a very early stage on the adoption curve, with the technology development curve advancing more rapidly, but without convergence of platforms and infrastructure, adoption will remain slow.

Adi Ben-Ari, founder of Applied Blockchain, is more optimistic: the logic is simple; higher returns and lower costs make it feasible, and by 2030, $1-5 trillion is achievable, with the pace shaped by regulation. Larry Fink and Rob Goldstein from BlackRock liken the current phase to the early internet in 1996.

The 2023 report originally estimated $4-5 trillion by 2030; this magnitude remains within a reasonable range, but the asset composition has changed, with more coming from public market securities and highly liquid collateral, while the private market is slower.

The baseline estimate of $5.5 trillion is derived from a global potential target market (TAM) of $392 trillion, broken down by asset class penetration rates. The pessimistic scenario is about half of the baseline, while the optimistic scenario is about 1.5 times the baseline. It is important to note that tokenization is not a magic wand; the underlying assets themselves must have demand, and the U.S. public equity market happens to have verified global demand.

The four sub-items are as follows.

Public Fixed Income. Total market size is $168 trillion, with a baseline penetration of 0.9% corresponding to $1.4 trillion. Among them, U.S. short-term debt assumes a 10% penetration and money market funds 5%. Short-term debt is naturally suitable for tokenization, being highly liquid, standardized, and a core collateral in repo and liquidity markets.

The growth of stablecoins is expected to bring about $1 trillion in incremental U.S. Treasury demand, some of which will shift towards tokenized short-term debt and on-chain collateral structures. Money market funds are more complex, relying on fund structures and existing market infrastructure, and liquidity pressures in 2020 and 2023 have made regulators more cautious.

Public Equity. The largest segment, with a total market size of $191 trillion, and a baseline of 1.9% corresponding to $3.6 trillion. The U.S. market assumes a 3% penetration corresponding to $2.6 trillion.

The underlying logic is that U.S. retail trading already accounts for 20-25% of market activity, with volatility periods (such as in April 2025) reaching about 35%, of which about 10% will gradually shift to tokenized distribution channels, reflecting the influence of digitally native investors such as millennials and Generation Z.

Outside the U.S., penetration is much lower, around 1%, due to more fragmented market structures, lower retail participation, and slower modernization of regulation and post-trade processing.

Rob de Rozario, founder of Alphaparty Capital: By 2030, in at least some markets, public equity could see 50% tokenization, driven by convenience rather than just speed.

Private Credit and Equity. Each assumed at about $100 billion. Private credit is more suitable for tokenization due to more standardized transactions and legal documents, and often has asset backing, compared to private equity.

Private equity and venture capital are more challenging due to long holding periods, J-curve returns, and low willingness for secondary trading. Currently, the total amount of tokenized credit assets is about $5 billion, with asset-backed credit around $2 billion and corporate credit nearly $700 million.

Real Estate Funds. Approximately $200 billion, about 1% of a $17 trillion market. Currently, tokenized real estate is only about $165 million but is growing rapidly, expected to increase about 50 times by 2024 and another six times by 2025, with future assumptions of growth tapering to an average of about four times a year.

Ryan Rugg, Global Head of Digital Assets at Citi Services: For tokenized assets to scale, efficient circulation of cash and liquidity is essential; on-chain payment infrastructure is a foundational enabler for broader tokenization.

Why Tokenization Was Previously Delayed

Understanding past obstacles helps explain why the current situation is different.

First, there was a lack of native issuance and full lifecycle support. Early efforts often focused on creating digital mirrors of existing off-chain assets, failing to fully unlock potential efficiency dividends.

Issues included incomplete infrastructure (lack of end-to-end capabilities for handling dividends, stock splits, voting, and redemptions), absence of on-chain settlement assets (central bank digital currencies and bank-grade deposit tokens were missing, with the last dollar needing to revert to traditional tracks), and regulatory uncertainty (ambiguity regarding the legal status of digital securities and disclosure requirements).

Second, there was insufficient secondary market liquidity. Tokenized securities have primarily been over-the-counter for a long time, with market fragmentation and a lack of incentives for market makers to quote; many products have high barriers to entry, open only to institutions or accredited investors; and there are regulatory restrictions on cross-border trading and collateral usage. ESMA has pointed out that these barriers, combined with a lack of standardization, hinder the formation of a liquid secondary market.

Third, there was poor cross-chain interoperability. As of May 2025, financial institutions had adopted at least 72 different ledgers, creating digital islands that do not communicate with each other. However, the market is converging, and the industry is moving towards fewer networks and interoperability solutions.

Chainlink's Cross-Chain Interoperability Protocol (CCIP) is one example, with a 2023 collaboration between ANZ Bank and Chainlink demonstrating how to connect private permissioned chains with public chains like Ethereum to enable cross-environment settlement of tokenized assets.

Is the Private Market Really Naturally Suitable?

The private market is often seen as a core use case for tokenization, due to slow transactions, heavy documentation, and scattered data, but the actual experience is mixed.

In theory, tokenization can automate compliance checks, capital calls, and allocations, and can also tokenize data for more controllable sharing, as well as expand access to private assets through wealth channels. Some more specialized uses are at the forefront, such as allowing investors to access royalty streams or using assets as collateral.

However, adoption has been slow. Hamilton Lane, KKR, and Apollo have provided tokenized private equity and credit to accredited wealth investors through feeder funds, but this represents a very small proportion of total scale. Regulatory and accredited investor requirements continue to shape participation, with most access still going through traditional channels.

More fundamentally, the structure of the private market itself limits the impact of tokenization. Transactions are large and concentrated, with a few companies contributing the majority of volume; even in semi-liquid structures, redemptions are restricted. Tokenization can improve access and reduce operational friction, but it cannot change the liquidity characteristics of the underlying assets, resulting in thin trading and fragmented liquidity pools.

How Tokenization Can Reshape Capital Markets

Tokenization has the potential to reshape the structure of capital markets, but the dividends will not be immediate; platform fragmentation, hybrid operating models, and regulatory uncertainty will shape this transition.

The focus will be on controlling the issuance and settlement tracks, favoring institutions that can integrate both within a trusted framework. New entrants tend to drive innovation, but existing institutions with scale, balance sheet strength, and client relationships can also benefit if they adapt appropriately.

Reshaping Capital Market Structure

Tokenization will not eliminate core market functions, but it will change how these functions are delivered, connected, and priced.

Matthew Blumenfeld, Global Head of Digital Assets at PwC: This is not a technology upgrade, but a change in market structure, redesigning access, distribution, and transparency.

Lowering capital costs, but initially leading to fragmentation. Shared ledgers will enable near-real-time ownership transfer and settlement, compressing reconciliation and post-trade processing layers. Complete disintermediation is unlikely, as core functions like settlement finality, risk management, and regulation will remain.

Efficiency estimates suggest that issuing a $1 billion bond on-chain could save about $2-3 million, with some research pointing to a reduction in trading costs of about 24%, but the dividends will take time to materialize; initially, assets scattered across multiple non-interoperable platforms may even exacerbate fragmentation.

Shifting from asset-to-cash to asset-to-asset. Collateral swaps, security swaps, and multi-asset atomic trading will reduce reliance on cash as an intermediary.

Fee compression will also give rise to new revenue pools. Traditional fee pools related to processing and intermediation may be compressed, but token issuance structuring, collateral optimization, data analytics, and smart contract lifecycle services will become new sources, with the net effect being a redistribution of value within the stack rather than a simple reduction.

Vertical integration of the value chain. Tokenization allows for tighter integration of issuance, trading, settlement, and custody, shifting control points to infrastructure providers and platform operators, benefiting vertical integration models. However, this does not equate to a closed system; cross-network interoperability remains key.

Settlement assets become strategic anchors. Whether using stablecoins, bank tokens, or central bank digital currencies for settlement will affect liquidity concentration, counterparty risk, regulatory acceptance, and interoperability. In practice, institutions will align issuance and trading with the settlement tracks they trust and can scale access to.

Real-time collateral management. Tokenization can support intraday collateral movements, such as intraday repos accruing interest by the minute rather than by the full day, improving liquidity.

Liquidity and interoperability determine scale. Early markets will fragment due to platform, protocol, and liquidity pool divisions, weakening network effects. Early on-chain bond issuances have proven the technology's feasibility, but often involve isolated transactions, requiring investors to onboard new platforms for each individual transaction.

A more pragmatic path is a hybrid model, such as Digital Native Notes (DNN), which combines digital issuance with existing post-trade processing and settlement tracks, without needing to move the entire market stack on-chain. Interoperability is not just about connecting blockchains, but also about integrating tokenized assets with existing custody, exchanges, settlement systems, workflows, and liquidity pools.

Hybrid transitional models will inevitably precede scaling. The path to a tokenized market is not linear. The current reality is that assets, cash, and records are scattered across legacy systems, private ledgers, and public chains, leading to complexities in reconciliation, risk management, compliance, and unresolved legal issues regarding ownership, liability, and cross-chain failures.

Adoption will depend more on the ability to navigate this hybrid complexity than on the technology itself. The tokenized market still requires a combination of traditional capital market capabilities and digital asset capabilities, integrating these skills into existing institutions, which may be as challenging as the technology itself.

Chris Rayner-Cook, Chief Investment Officer at Brevan Howard Digital: The killer use case for tokenization is capital efficiency. It brings not just faster settlement, but atomic settlement, removing counterparty risks that force institutions to hold large capital buffers, and when combined with programmability, determines how efficiently released capital can be redeployed.

The biggest bottleneck currently is the lack of a unified digital identity standard, especially considering privacy; the core constraint from regulators is not whether trading can occur, but whether counterparties can be identified. As for the last-mile distribution to global investors, the main bottleneck is also the regulatory and investor protection framework, rather than the technology.

Who Controls the Ecosystem

As operational friction decreases, the focus will shift to two structural control points: control over asset issuance and distribution, and control over settlement currency tracks.

Institutions that can scale and integrate both within a trusted framework will gain structural advantages: internalizing the complete transaction loop from initiation to issuance, trading, settlement, custody, and collateral management; earning from both asset and currency layers; using pricing on one side to subsidize the other in a platform-like approach, similar to the logic of super apps in Asia; and influencing interoperability frameworks, collateral eligibility, and smart contract design, thereby defining standards.

Based on this, four types of players emerge.

Ecosystem Coordinators: Some banks, asset managers, and stablecoin issuers simultaneously hold control over asset issuance and settlement tracks, influencing market design and value distribution, but their advantage depends on achieving scale and regulatory acceptance at the settlement layer.

Distribution-Driven Challengers: Digital brokers, fintech, and wealth platforms. As issuance barriers lower, bottlenecks shift from manufacturing to distribution and customer reach, and those who control customer relationships and data will capture value.

Cash Infrastructure Providers: Stablecoin issuers and banks without tokenized asset products earn reserve income, float, and trading fees at the center of settlement flows, but if they do not extend into asset issuance or distribution, their roles may become trapped at the infrastructure layer, with profits squeezed by competition.

Most Impacted: Traditional post-trade intermediaries. With neither side benefiting, as settlement becomes faster, more automated, and atomic, revenues based on reconciliation and processing complexity will be compressed. They will not disappear, but will need to shift towards higher-value services such as collateral management and cross-system interoperability.

Suzy Singh and Giang Bui from Securitize: Tokenizing assets is easy; the technology has been validated. The hard part is the utility and distribution of assets after they are on-chain. Without utility, tokenization is just a static record of ownership.

Liquidity is the primary challenge; tokenization cannot change the liquidity characteristics of the underlying assets, nor create liquidity. The focus should shift to building secondary markets and trading infrastructure.

Different Clients, Different Adoption Paths

Institutional clients are driven by trust and scale. Large asset managers and corporations prefer familiar, regulated counterparties; tokenization is layered on existing relationships rather than replacing them, and they will not migrate to fragmented platforms that introduce parallel processes.

Wealth clients (high-net-worth and ultra-high-net-worth individuals) currently view tokenization more as a concept, with no one actively seeking to tokenize stocks or 24/7 markets. To motivate them, there must be tangible benefits: better access to private markets, stronger liquidity, and superior tax or return outcomes.

The potential is clearer for alternative assets and digitally native assets, where tokenization can bring fractional ownership, programmability, and other new features.

On the retail side, tokenization can broaden access, but access does not equal participation. Whether it can be utilized depends on how simple it is and how clear the value is. Ultimately, what drives retail adoption is not tokenization itself, but whether it can be seamlessly integrated into everyday financial activities.

Deborah Querub, Head of Digital Assets at Citi Wealth: We are in the midst of the largest wealth transfer in history, with the next generation being technology-native, expecting value to flow as quickly as data.

A general judgment is that the constraints are not technological but rather related to investor adoption. Pricing, returns, liquidity, and risk are always more important than the underlying settlement mechanisms; unless tokenization can deliver clear economic advantages or seamlessly integrate into existing processes, investor behavior will not change.

Emergence of New Market Participants

The new market structure will allow a broader range of participants to enter the asset lifecycle. New entrants can build directly on blockchain-native infrastructure without the burden of legacy systems, enabling faster product development and more flexible experimentation.

They will focus on several core functions: issuance and structuring infrastructure, trading and liquidity provision, custody and asset services, identity compliance and trust layers, and underlying infrastructure and interoperability.

However, a low technical threshold does not equate to low barriers. Licensing, custody, and compliance regulatory requirements remain heavy, and institutional adoption still hinges on trust, security, and operational resilience. True differentiation lies in the ability to combine infrastructure, regulatory alignment, and scalable liquidity.

Existing Institutions Need to Evolve and Adapt

Existing financial institutions will remain at the center of the ecosystem but must respond to competition from new entrants. Monetization can rely on both existing and emerging services.

Recent opportunities lie in issuance platforms, custody, consulting, and brokerage services. Emerging opportunities are in market making and liquidity provision, data analytics, yield products (structured products, lending, collateral financing), and asset management.

Joseph Lubin, co-founder of Ethereum and founder of Consensys: Leading financial institutions in the U.S. are embracing decentralized infrastructure to provide 24/7 on-chain markets, laying the foundation for a new financial system built on open protocols and shared infrastructure.

The most challenging immediate issue is the coexistence of tokenization systems and legacy systems. Institutions must operate across hybrid environments, running two processes in parallel, building connections, and managing new compliance and reconciliation requirements, leading to initial cost intensiveness and delaying the realization of efficiency dividends.

Infrastructure Design Choices

The choice of underlying architecture involves trade-offs between openness (liquidity and distribution), speed (scalability), and control (compliance and counterparty management). The three main models are as follows.

Public Permissionless Chains: Open to everyone, theoretically offering the highest liquidity and interoperability, but with low privacy and visibility of all transactions. Scalability relies on Layer-2 and modular architectures, represented by Ethereum and Solana.

Private Permissioned Chains: Closed networks with controllable high throughput and high privacy, but limited liquidity and weak native interoperability, represented by Hyperledger Fabric and R3 Corda.

Public Permissioned Chains: Open but with controlled access, liquidity falls between the two, and privacy can be configured (e.g., zero-knowledge proofs), represented by Canton Network and Provenance.

A commonly overlooked dimension is the settlement asset, which refers to which currency layer is used. Institutions often do not choose infrastructure in isolation but first select trusted settlement tracks and then align asset issuance.

Compliance is increasingly being implemented at the application layer, with identity, KYC/AML, and transfer restrictions embedded through smart contracts and middleware, allowing public chains to support regulated scenarios, thus weakening the traditional trade-off between openness and compliance.

Early institutions often chose private permissioned or hybrid models, but an increasing number of issuances are beginning to go on public chains, especially for standardized, liquid assets like money market funds and government securities.

BlackRock's tokenized U.S. Treasury fund BUIDL expanded to multiple chains after launching on Ethereum, and Franklin Templeton's on-chain government money market fund FOBXX has extended from Stellar to networks like Ethereum. As tokenization matures, the key design question is no longer whether to use public or private chains, but how to combine infrastructure, compliance layers, and settlement assets into a coherent operational model.

Risks Associated with Tokenization

The vulnerabilities pointed out by regulators are almost all not technical issues, but whether core financial principles such as ownership, settlement integrity, and investor protection can be upheld after being reconstructed on-chain.

Private Currency Settlement Risks. Using stablecoins for settlement may introduce credit, liquidity, and redemption risks; the ability to convert to central bank currency may be impaired under stress scenarios.

Current stablecoins still have structural limitations such as pre-funding, leading the market to explore tokenized deposits and tokenized money market funds issued by regulated banks as a source of yield, high-quality, and more scalable on-chain liquidity. The coexistence of multiple digital currencies challenges the monetary singularity that underpins financial trust and may amplify contagion risks during stress periods.

Unclear Ownership Rights. Tokenization may separate economic exposure from legal ownership; holding a token does not necessarily equate to having enforceable rights to the underlying assets, leading to ambiguities in bankruptcy, custody, and cross-border enforcement. Natively issued tokenized assets can alleviate this issue, but it depends on whether the jurisdiction recognizes them.

Investor Protection and Disclosure Gaps. Tokenized assets may be packaged to resemble traditional securities but lack clarity on rights, risks, and underlying structures, increasing the risk of mis-selling. Legislative efforts, including the CLARITY Act, aim to ensure that tokenized instruments meet the same disclosure and protection standards as traditional products.

Hybrid Models and Fragmentation Risks. On-chain assets paired with off-chain processes may lead to opacity, operational complexity, and unclear responsibilities, reintroducing traditional issues like counterparty risk; fragmentation between platforms may also reduce liquidity efficiency and limit net settlement benefits.

Asset Selection and Liquidity Risks. Tokenization will not uniformly improve all assets. Early efforts often focused on easily issued assets rather than those with inherent trading demand; if the underlying lacks liquidity and buying interest, tokenization itself cannot change the fundamentals, resulting in thin trading and fragmented liquidity pools.

Emerging Systemic Risks. As control over issuance, distribution, and settlement concentrates in a few platforms, institutions anchoring liquidity or controlling settlement tracks may become critical nodes, increasing systemic reliance on a few participants.

Improved interoperability may also open new contagion channels. Atomic settlement reduces counterparty risk but introduces dependencies on smart contracts, oracles, and cross-chain bridges, and failures in these components could disrupt settlement flows.

Next Stop: On-Chain Finance

Once tokenized assets and on-chain currencies scale, the next step is their use in an on-chain financial system. So far, DeFi has primarily relied on crypto-native assets and self-contained liquidity pools, resulting in fragmented liquidity and high volatility.

Tokenization can change this: bringing higher-quality collateral such as bonds, funds, and deposits on-chain to support more stable liquidity; leveraging atomic settlement and programmability to allow assets and cash to flow together, enhancing capital efficiency and bridging on-chain activities with traditional market structures.

However, DeFi will not replace traditional finance; it is more likely to evolve into a hybrid model, allowing high-quality, liquid scenarios like collateral and fund management to go on-chain first.

From Crypto-Native DeFi to Institutional Adoption

Digital assets are evolving from mere cryptocurrency trading to a broader financial architecture that combines tokenized assets and on-chain currencies (stablecoins, bank tokens, and possibly central bank digital currencies).

DeFi has experienced significant but volatile growth. Total value locked peaked at about $180 billion in 2021, plummeted significantly in 2022 with the crypto market correction and a series of collapses, then rebounded, peaking at about $170 billion in 2025, currently around $100 billion.

The next phase of development is more likely to rely on real and financial assets going on-chain rather than speculative activities, thereby expanding the collateral base and supporting more sustainable yields.

Germán Soto Sanchez from Broadridge: For end users, value is not just about efficiency, but also about access to yields (such as lending protocols), fractional ownership, and asset classes that were previously inaccessible to many (like private assets).

DeFi has several characteristics that are difficult for traditional systems to replicate: 24/7 continuous markets, real-time flows of global collateral, cross-border and cross-currency foreign exchange fund flows, and large treasury operations are particularly useful; natively supporting delivery versus payment (DvP) mechanisms with atomic settlement; and programmability at the asset and currency layers, allowing margin calls, interest payments, and collateral triggers to be directly written into code. The shift from static holding to actively callable collateral is at the core of DeFi's value proposition.

Tokenization, as a driver of on-chain finance, is reflected in three points: expanding the universe of on-chain assets, introducing more stable and familiar collateral; pairing tokenized assets with on-chain currencies to allow DvP and collateral flows to occur natively on-chain, reducing off-chain reconciliation; and providing assets similar to existing tools to facilitate institutional participation.

In the U.S., the Digital Asset Market Clarity Act points towards a more structured regulatory framework, including clearer classifications for digital assets and clarifying the regulatory divisions between the SEC and CFTC. The bill is still progressing in the Senate, but the direction is towards increasing regulatory clarity.

Debates surrounding stablecoin yields and on-chain incentives highlight the trade-offs between innovation and financial stability. Fragmentation in cross-chain, standards, and settlement assets may limit seamless interoperability, leading to gradual adoption. Recent implementations have focused on high-quality collateral and fund management, with the potential to extend to securitization and structured financing in broader credit markets in the long term.

Institutional Perspective and Technical Standards

Perspectives from Global Standard-Setting Bodies

The four institutions have a largely consistent stance: tokenization is still in its early stages, and outcomes depend on how infrastructure, regulation, and settlement frameworks evolve.

The Financial Stability Board (FSB) focuses on the impact on financial stability, noting in its 2024 report that tokenization is currently small in scale and does not pose a substantial risk to global financial stability, but warns that risks may emerge if adoption accelerates and requires close monitoring.

The International Organization of Securities Commissions (IOSCO) focuses on the current market, noting that activities are concentrated in a few use cases and jurisdictions, and the benefits of efficiency and transparency have not yet been realized at scale. Fragmentation, lack of interoperability, and absence of widely used on-chain settlement assets are major constraints, with risks largely consistent with traditional markets but appearing in new forms.

The Bank for International Settlements (BIS) takes a systemic perspective, viewing tokenization as the next step in the evolution of the monetary financial system, where a unified ledger combining central bank reserves, commercial bank money, and government bonds could support this transition, but the system must uphold core principles of singularity, resilience, and integrity.

The International Monetary Fund (IMF) frames tokenization as a structural shift in financial architecture rather than a marginal efficiency improvement, with benefits dependent on a clear policy framework, legal certainty, secure settlement assets, and strong governance. If these prerequisites are lacking, tokenization could exacerbate financial system instability due to its rapid circulation, excessive concentration of nodes, and market fragmentation.

In summary, the views of IOSCO, BIS, and IMF converge on three core bottlenecks: interoperability, legal certainty, and settlement mechanism design. If these three challenges cannot be overcome, the development of tokenization will remain lukewarm, and the so-called efficiency dividends can only be realized in localized scenarios.

Tokenization Standards and Interoperability

As the market continues to evolve, the importance of technical standards in interoperability, compliance control, and system scalability is increasingly highlighted. These underlying standards tightly define how digital assets will achieve standardized issuance, transfer, settlement, and governance across chains and different ledger environments.

Within the Ethereum ecosystem, ERC-20 and ERC-721 lay the foundational framework for fungible and non-fungible assets; while the next generation of securities token standards like ERC-1400 embeds complex logic such as transfer restrictions, whitelist identity verification, investor permissions, and compliance controls, aiming to provide solid support for on-chain assets subject to stringent regulation.

Traditional fields outside of blockchain are also accelerating resonance. For example, the PCI Security Standards Council (PCI SSC), a consortium of payment giants, has issued detailed guidelines to guide institutions in using tokenization technology to replace extremely sensitive underlying payment card data.

Advancing higher-level standardization can effectively shatter market fragmentation, smooth operations between platforms and settlement assets, and pave the way for broader institutional entry.

However, this process is currently in its early stages, with multiple technical frameworks competing across different jurisdictions, with varying underlying architectures and complex business scenarios.