Technology revolution reshaping the financial markets

The shifting landscape

The rise of digital assets and tokenization represents a fundamental shift in how capital markets infrastructure is evolving. Digital assets have moved from the periphery into the strategic agenda of mainstream financial institutions, and the central question is no longer whether real-world assets will be tokenized at scale, but when and how (DLT) will become embedded in market operations.

The extent of institutional engagement is now substantial. J.P. Morgan’s Kinexys platform alone has processed over USD1.5tn in tokenized transactions, while prominent bond issuances on DLT platforms by the European Investment Bank, UBS and the Asian Infrastructure Investment Bank show that major issuers are treating DLT as a credible alternative to traditional infrastructure. The growth of tokenized money market funds from firms including BlackRock and Franklin Templeton—with BlackRock’s BUIDL fund now exceeding USD2 billion—illustrates that these are no longer experimental pilots but sizeable funds attracting real institutional investment. 

Meanwhile, the stablecoin market has evolved from a niche instrument supporting cryptocurrency trading into a USD250bn ecosystem with applications spanning cross-border payments, treasury management and capital markets settlement. The regulatory response has been equally significant, with comprehensive frameworks now advancing across the EU, UK, U.S., and Asia-Pacific.

Here we explore three interconnected areas: digital securities, the tokenization of capital markets infrastructure and the growing role of stablecoins and other forms of tokenized money. We do not examine native cryptocurrencies such as Bitcoin or Ethereum in detail, except where they are relevant to understanding the underlying infrastructure. 

Taking a cross-jurisdictional approach is critical; regulatory approaches differ markedly between the European Union, the United Kingdom, the United States, Singapore, Hong Kong, Japan and other major markets—and those differences have practical implications for institutions operating across borders. 

Boards need a clear view of how tokenization may affect their institution’s strategic positioning, risk profile and competitive environment, and be able to connect emerging technology to familiar questions of governance, risk and opportunity. 

Making sense of the terminology

Any exploration of digital assets and tokenization needs to start with a shared vocabulary. The terminology in this space can obscure rather than illuminate, and meaningful analysis depends on distinguishing between instruments that may appear similar but carry very different risk profiles.

• Tokenized securities are digital representations of existing securities where the underlying instrument continues to be issued on traditional infrastructure such as a central securities depository. The token serves as a “digital twin” that reflects ownership of the underlying asset and enables it to be transferred on DLT while the authoritative record remains elsewhere.
• Native digital securities, by contrast, are securities issued directly on DLT without a traditional counterpart. These “security tokens” satisfy applicable regulatory definitions of securities under local law and exist natively on the ledger itself.
• Tokenized money encompasses several distinct instruments used for settlement purposes.   
  • Tokenized deposits are digital representations of existing bank deposits where the ultimate record of ownership continues to be maintained in traditional systems.
  • Deposit tokens are transferable digital tokens issued by licensed depository institutions that evidence a deposit claim against the issuing bank.
  • Stablecoins are privately issued digital tokens designed to maintain stable value relative to a reference asset such as a fiat currency, backed by reserves of cash and high-quality liquid assets but not issued by a central bank.
  • Wholesale central bank digital currencies are tokenized central bank money enabling settlement of wholesale transactions by regulated financial institutions.

• Tokenized funds represent shares or units in investment funds issued and transferred using DLT. Tokenized money market funds have emerged as a particularly significant category, combining traditional fund structures with blockchain-based programmability. 

The important point is that the underlying technology does not determine the legal or economic character of an instrument. The nature of the claim, its backing, its form, and access conditions determine the properties of tokenized instruments, not simply the technology on which they are recorded. 

Why institutions are engaging

The fundamental value proposition of tokenization lies in efficiency and automation across the entire trade lifecycle. Several drivers are motivating institutional engagement, and understanding them helps explain why established players are committing real resources to this space.

• Operational efficiency and reduced settlement times: tokenization directly addresses longstanding pain points in securities markets. By leveraging smart contracts and distributed ledgers to streamline issuance, trading, settlement, and asset servicing, institutions can achieve precision settlement, automated asset servicing, and enhanced regulatory reporting capabilities. The ability to settle transactions in minutes or seconds rather than days reduces counterparty risk and frees trapped capital.
• Liquidity and collateral optimization: tokenized collateral management enables real-time settlement, reduced processing friction and better visibility into asset mobility. Firms can unlock trapped capital and reduce operational risk, with the ability to mobilize collateral around the clock and execute intraday repo transactions a significant improvement over existing arrangements.
• Market access and distribution: tokenization can broaden investor accessibility through dual-listing and seamless cross-platform interoperability. Features such as fractionalization could potentially enable smaller investment amounts and broader participation in previously illiquid asset classes.
• Transparency and regulatory reporting: a shared authoritative ledger provides all parties with a single source of truth, simplifying reconciliations and audits. Enhanced transparency supports improved regulatory reporting capabilities and potentially enables forms of “embedded supervision” through real-time regulatory visibility.
• Product innovation: smart contracts enable programmable securities with automated corporate actions, embedded compliance logic and conditional payment features. These capabilities support new product structures and operating models not easily achievable with traditional infrastructure. At the same time, the ease of trading digital assets has been enhanced by the emergence of new distribution channels that broaden investor access. These include non-custodial wallets, which allow investors to receive assets issued in a non-intermediated manner. As a result, investors can hold and trade assets directly, without relying on traditional intermediaries that restrict or manage the investor base. On-chain issuance of registered form instruments enables these assets to be held and traded in a quasi-book entry format. In this model, investors interact with the digital asset ecosystem more directly, bypassing conventional intermediaries. For instance, platforms like Metamask can be used to trade registered form instruments, providing investors with greater flexibility and control over their holdings. The absence of intermediaries in this process removes barriers and restrictions, facilitating more efficient and potentially more inclusive access to digital assets.

Industry analysis projects that tokenized real-world assets will grow from approximately USD0.6tn 2025 to USD18.9tn by 2033, representing a compound annual growth rate of more than 50%.

From pilots to production

The market has progressed from experimentation to live deployments, though adoption remains concentrated in specific asset classes and scenarios. 

• Repo and collateral management represents one of the most advanced use cases. Platforms such as J.P. Morgan’s Kinexys and Broadridge’s Distributed Ledger Repo are processing significant daily volumes, with Broadridge’s platform processing an average of USD384bn as of December 2025. These deployments demonstrate that tokenization is operationally viable for critical financial functions.
• Fixed income issuance has seen prominent digital bonds issued by major institutions. UBS issued a CHF375m bond on SDX, while the Asian Infrastructure Investment Bank launched a USD500m digital bond through Euroclear. Various sovereign issuances have followed, including the Hong Kong Government Green Bond Program, while the UK government has announced plans to issue a pilot digitally native sovereign gilt using DLT.
• Fund tokenization has achieved particular traction, especially in the money market fund segment. BlackRock’s tokenized Treasury fund BUIDL has grown to more than USD2bn in market value, accounting for more than 30% of the tokenized Treasury market. Franklin Templeton’s on-chain government money fund has amassed over half a billion in assets.
• The size of the stablecoin market now exceeds USD250bn in outstanding balances, led primarily by Tether (USDT) and USD Coin (USDC). This category has achieved global adoption with more than 200 million active wallet addresses worldwide and tokenized money instruments combined represent a market of at least USD300bn.

Despite this growth, adoption remains uneven. Market structure remains fragmented, with many platforms operating in isolation or as proprietary systems lacking integration with wider capital markets infrastructure. Secondary market liquidity for tokenized assets remains shallow in many cases. The industry is progressing through what may be characterized as an “intranet to internet” period, where current fragmentation will ultimately give way to network effects as interoperability improves.

With that said, it should also be noted that operators of traditional market infrastructures like the International Central Securities Depositories (ICSDs) and the Depository Trust and Clearing Corporation (DTCC) are analyzing how to bring their operations on to a DLT layer, which should in turn be able to connect to wider networks. 

The settlement layer—stablecoins and digital money

The settlement of securities transactions on DLT is dependent on integration with payment infrastructure. Various forms of tokenized money are emerging to fulfil this role, each with distinct characteristics and risk profiles.

As outlined above, the principal categories are tokenized deposits and deposit tokens issued by banks, privately issued stablecoins backed by reserves, wholesale central bank digital currencies and tokenized money market funds. Each differs in the nature of the claim it represents, its backing, its form and its accessibility. These distinctions have important implications for credit risk, liquidity risk, regulatory treatment and operational integration.

• Enabling atomic settlement: stablecoins and other forms of tokenized money enable atomic delivery-versus-payment settlement, where the exchange of securities and cash occurs simultaneously and irrevocably. This capability addresses counterparty risk in ways that traditional staged settlement cannot. Stablecoins are already being used as payment instruments and as cash equivalent settlement tools for tokenized funds.
• Central Bank Digital Currency (CBDC) developments: central banks across major jurisdictions are exploring or piloting digital currencies. China’s e-CNY has reached significant transaction volumes. The European Central Bank has led exploratory DLT settlement work with more than 60 industry participants. The Bank of England is progressing work on a potential digital pound. Wholesale CBDC initiatives in Singapore, Switzerland and other jurisdictions are demonstrating the feasibility of central bank money settlement for tokenized assets.
• Financial stability considerations: central banks have identified core properties that tokenized money must exhibit to function safely as settlement assets. “Singleness of money” requires that different forms of money remain interchangeable at par. “Elasticity” refers to the flexible supply of money to meet payment obligations without gridlock. “Finality” concerns irrevocability, achieved when a payment is definitive and cannot be reversed. Stablecoins may deviate from par value and, when validation is distributed and subject to probabilistic consensus, establishing the point of irrevocability may be challenging.
• Emerging use cases: beyond settlement of tokenized securities, tokenized money is being deployed for cross-border payments, treasury and liquidity management, and trade finance. Cross-border payments has emerged as the primary use case, reflecting fundamental limitations in current correspondent banking infrastructure elsewhere.

A patchwork of regulation

Regulatory frameworks for digital assets are developing rapidly across jurisdictions, though at different speeds and with varying approaches. 

• The EU’s Markets in Crypto-Assets (MiCA) framework provides a harmonized regime for categories of crypto-assets and related services. MiCA classifies stablecoins as “e-money tokens” or “asset-referenced tokens” subject to specific requirements. Separately, the EU’s Distributed Ledger Technology (DLT) Pilot Regime provides a narrowly defined framework for experimenting with market infrastructures built on DLT (i.e., the trading and settlement of tokenized instruments that qualify as financial instruments under MiFID II). However, the Pilot Regime has been criticized for restrictive thresholds and limited uptake. The other major consideration in Europe is the settlement asset used to pay the cash leg of a trade. In the summer of 2025, the ECB approved a plan designed to enable settlement of DLT transactions in central bank money, including a six-month pilot linking DLT platforms to TARGET Services. Further, several EU jurisdictions have, at national level, adopted new legislative frameworks or refined their existing regimes to address the issuance and custody of tokenized financial instruments. Laws pertaining to these issues remain within the ambit of national legislators within the EU.
• The UK’s Digital Securities Sandbox was launched in 2024 to facilitate the issuance, trading and settlement of digital securities under close regulatory supervision. The sandbox is designed so participants can scale their businesses as they demonstrate regulatory compliance, with the opportunity to transition to a permanent regime. The UK government intends to issue a pilot digitally native sovereign gilt within the sandbox framework. The Financial Conduct Authority (FCA) has moved to allow UK retail access to crypto exchange-traded notes on UK-recognized investment exchanges while maintaining its ban on crypto derivatives for retail investors. The FCA is also consulting on stablecoin legislation and market structure rules.
• In the U.S., the GENIUS Act became law on July 18, 2025, creating a federal framework for “payment stablecoins” that covers authorization, the requirement for reserves to be held that are sufficient for the stablecoin to be redeemed, and disclosure and compliance obligations. However, broader market-structure legislation remains unsettled. The CLARITY Act passed the House on July 17, 2025 but has not yet been enacted. In parallel, in July 2025 the Securities and Exchange Commission (SEC) launched “Project Crypto”, an initiative aimed at modernizing how it approaches oversight of digital assets. On January 29, 2026, the SEC and Commodity Futures Trading Commission (CFTC) announced that Project Crypto would become a joint inter-agency initiative, with the two regulators committing to develop a shared crypto-asset taxonomy, coordinate oversight, and reduce the fragmentation and duplication that have complicated compliance for market participants.
• In Asia-Pacific, Singapore is pursuing regulated experimentation focused on settlement assets and round-the-clock settlement functionality. Singapore’s Monetary Authority has finalized a framework for single currency stablecoin issuance and is spearheading Project Guardian to test tokenized securities and decentralized finance applications. Hong Kong has moved from consultation to statute with a licensing regime for stablecoins backed by a fiat currency. Hong Kong’s Stablecoins Ordinance came into effect in August 2025, establishing a licensing regime for fiat-referenced stablecoin issuers. Japan has amended its Payment Services Act to regulate stablecoin issuance and distribution. Meanwhile, Mainland China has emphasized its ban on private virtual-currency activity and tightened restrictions around real-world asset tokenization and unauthorized stablecoins that are tied to the yuan.
• Among international standard-setters, the Financial Stability Board, International Organization of Securities Commissions (IOSCO), the Basel Committee and the Committee on Payments and Market Infrastructure (CPMI)-IOSCO have issued guidance addressing stablecoin arrangements and tokenization. Their standards converge on core issues such as governance, reserve quality, redemption rights and systemic oversight. The Basel Committee’s prudential framework classifies tokenized deposits as Group 1 assets, with qualifying stablecoins in Group 1b and other stablecoins in Group 2, with corresponding capital implications. 

Despite progress, significant variation remains in areas such as reserve composition requirements, localization rules and treatment of foreign issuers, reflecting different policy preferences across jurisdictions.

Risk issues for boards

Boards need to understand the principal risk categories associated with digital assets and tokenization, recognizing that risk management frameworks continue to evolve. 

• Legal and regulatory risk: regulatory frameworks remain incomplete in many jurisdictions, creating uncertainty regarding the legal status of tokenized assets, the application of existing rules and the treatment of novel arrangements. Legal certainty regarding settlement finality, ownership transfer and enforcement of smart contract terms varies across jurisdictions. Cross-border activities face particular challenges given regulatory fragmentation.
• Operational and technology risk: cybersecurity threats vary significantly across DLT architectures. Smart contract vulnerabilities arising from code bugs, logical errors or malicious design can lead to loss of funds or frozen assets. Key management presents significant operational challenges. Platform resilience and disaster recovery capabilities require assessment.
• Settlement finality risk: there is uncertainty around when a transaction becomes irrevocably final. Public permissionless networks may achieve only probabilistic finality, where the probability of reversal decreases over time but never truly reaches zero. Private permissioned networks can be designed for deterministic finality with clear legal frameworks. Legal agreements must clearly define the moment of finality and bind participants to honour it.
• Counterparty and credit risk: stablecoin arrangements introduce exposure to the creditworthiness of issuers and the adequacy of reserve backing. Reserve composition, segregation, custody and audit arrangements are critical considerations. The concentration of the market among a small number of issuers presents systemic risk considerations.
• Interoperability and concentration risk: the proliferation of disparate blockchain networks creates fragmentation risk. The mechanisms to interconnect networks, particularly cross-chain bridges, have themselves become points of failure and frequent targets for attack. Conversely, if one interoperability solution becomes widely adopted, an issue there could cascade across many connected platforms.
• AML, CFT and integrity risk: instruments that are peer-to-peer transferable and pseudonymous may complicate enforcement of anti-money laundering and sanctions rules. While public ledger transparency and analytics tools provide some mitigation, compliance infrastructure for tokenized assets continues to mature.

Risk management frameworks have evolved to meet institutional standards, drawing on existing principles for operational resilience, cybersecurity and financial market infrastructure. Regulated financial institutions possess well-established capabilities in technology risk management, operational resilience and compliance that form the foundation for managing risks associated with DLT adoption.

What are the barriers to adoption?

Several persistent barriers constrain scalable adoption of tokenization. 

• Market liquidity and participation: secondary market liquidity for tokenized assets remains shallow in many cases. Issuers cite distribution uncertainty while investors report onboarding friction and limited exit options. The development of regulated broker-dealer networks and market-making protocols is essential to enable meaningful price discovery and trading volume.
• Interoperability and platform fragmentation: most platforms remain siloed. Private permissioned ledgers dominate early use cases but often lack flexibility to scale across jurisdictions or asset types. Integration complexity, compliance differences and the absence of widely adopted standards continue to delay progress. The industry lacks the adoption of common data models such as the Common Domain Model to ensure data interoperability.
• Legal harmonization: legal certainty is essential to support lifecycle events such as ownership transfer, settlement finality and enforcement of smart contract terms. In many jurisdictions, these frameworks remain incomplete. Global fragmentation slows institutional confidence and inhibits cross-border deployment.
• Custody, compliance and operational readiness: custody infrastructure for tokenized assets remains fragmented. While some global custodians support tokenized funds and digital asset servicing, capabilities vary by region and asset class. Institutions must build new risk, identity and compliance tooling to handle wallet permissions, smart contract governance and regulatory reporting across jurisdictions.
• Cost and strategic trade-offs: the upfront cost of transitioning to tokenized infrastructure remains significant. Full implementation may require substantial investment depending on institutional scale. Uncertain payback timelines, parallel system maintenance and lack of standardized return-on-investment benchmarks contribute to internal hesitation. Strategic alignment is further complicated by potential disintermediation, particularly for participants that derive margin from legacy infrastructure.
• Talent and cultural readiness: institutions require personnel with expertise in DLT, smart contract development, digital asset custody, and the evolving regulatory landscape. Building or acquiring this capability while managing cultural change presents organizational challenges.

Looking ahead

Despite these barriers, the foundational pieces are increasingly in place. Mature technology platforms, clearer regulations and committed institutional players have aligned to create an environment where tokenized assets can expand. Market momentum, supported by regulatory progress, suggests that the conditions are set for tokenization to move from early-stage projects to a material component of market infrastructure in the coming years.