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Author:Fabienne van Kleef(Global Digital Finance CompanyAnalyst)
Tokenization is developing rapidly;BlackRockThe CEO said it may surpass AI in importance.youWhat do you think of this trend?
Yes, tokenization is quickly emerging as a transformative force in finance.According to industry research from 21.co, the tokenized asset market will grow from US$8.6 billion in 2023 to more than US$23 billion by mid-2025.Forecasts show that the total scale of asset tokenization across bonds, funds, real estate and private markets could reach trillions of dollars over the next decade.BlackRock CEO Larry Fink said that tokenization may be more impactful than artificial intelligence, which also highlights the significance of this trend.Tokenization is reshaping how we express and transfer value, just as the Internet reshaped the exchange of information.If the infrastructure is in place, tokenization is expected to have a profound impact on the global financial landscape.
What are the current main application scenarios and challenges of tokenized assets?
Today, the most active application scenarios of tokenization are concentrated in the field of financial instruments where efficiency and liquidity are crucial.Tokenized money market funds and bonds are a prime example.Tokenized money market funds and government bond funds already run on multiple blockchains, enabling near-instant transaction settlement and leveraging stablecoins for fund subscriptions and redemptions, creating new cash management workflows.Real asset application scenarios such as sovereign debt, real estate and private credit are also evolving.The advantages of these areas are divisible ownership of assets and 24/7 markets, which can open investment channels and improve liquidity for traditionally illiquid assets.
Still, there are some challenges to overcome.While regulatory and legal frameworks are steadily improving, progress varies across jurisdictions, which may create some uncertainty.Countries have different definitions of digital asset custody, or differences in their recognition of blockchain records, which means tokenized assets may be treated differently in different regions.From a technology perspective, interoperability and asset security remain top priorities, although many interoperability challenges have proven solvable.Cross-platform transfers have already worked successfully in the industry sandbox in the Global Digital Finance (GDF) Tokenized Money Market Fund (TMMF) report.Overall, tokenization is already creating value in key financial services areas such as fund management and bond markets, but scaling up to wider adoption will require further harmonization of rules and broader upgrades to existing institutional infrastructure to address these challenges.
How does tokenization impact the U.S. dollar and traditional FX markets?
Tokenization is blurring the lines between traditional currencies and transfers of value, and the U.S. dollar is at the center of this shift.Most stablecoins are explicitly backed by the U.S. dollar and short-term Treasury bills, further promoting the dollarization of cross-border payments.By 2025, reserves of major USD stablecoins (mainly held in the form of U.S. Treasuries) had grown to such a size that stablecoin issuers collectively held more U.S. Treasuries than some countries, such as Norway, Mexico, and Australia.
For the traditional foreign exchange market, the widespread application of tokenization brings both opportunities and challenges.On the one hand, the emergence of digital currencies, especially US dollar-backed stablecoins and the increasingly popular wholesale central bank digital currency (CBDC), can make foreign exchange transactions faster and more efficient.This includes round-the-clock, near-instantaneous settlement of cross-currency transactions without the need to rely on correspondent banks.
However, regulation remains a key factor in these various developments, and governments want to ensure that stablecoins can be trusted in various markets before they can truly function as currencies.In the United States, the recently passed GENIUS Act provides much-needed clear guidance for U.S. dollar-backed payment stablecoins by clarifying reserve and redemption requirements, which we expect will increase confidence in the large-scale use of tokenized dollars.
Overall, tokenization is not expected to completely replace traditional currencies, but may lead to the dollar’s influence remaining strong or even expanding further in the foreign exchange market.Settlement may be real-time, and markets will need to adapt to a system in which sovereign currencies and their digital token versions can flow freely across interconnected networks.
What would happen if every company or institution used digital wallets to store tokenized assets?
If in the future every company had a digital wallet for storing tokenized assets, we would see a completely different financial landscape that was more interconnected, instantly convenient, and decentralized.In this case, the role of custodians and wallet providers will become crucial.Custodians will transform from simple custodians to critical infrastructure and essential service providers, ensuring the security, compliance and interoperability of wallets and the assets within them.
From a practical perspective, widespread use of digital wallets means that value can flow as freely across the web as email.Settlement can be completed in real time, significantly reducing counterparty risk and freeing up capital.Corporate treasurers can handle assets (such as tokenized bonds or invoices) directly, conducting peer-to-peer transactions or lending activities with minimal friction.This requires a unified protocol, a standardized digital identity framework, and a clear legal status of on-chain transactions.
How does tokenization impact liquidity in secondary markets and institutional investors?
Tokenization is expected to significantly increase liquidity in secondary markets, especially for assets that have historically been illiquid or complex to trade.By converting assets into digital tokens, fractional ownership and near-24/7 trading are possible, broadening the pool of potential buyers and sellers.We’ve seen this in practice.Settlement for tokenized funds and Treasuries is nearly instantaneous, rather than days as in traditional markets, allowing investors to reinvest more quickly.New analysis from Global Development Fund (GDF) shows that the settlement cycle of tokenized money market funds (TMMF) is only a few seconds, compared with the typical settlement cycle of one to three days for traditional money market funds.
However, there are some caveats.In the early stages, liquidity in the tokenized market may be fragmented.Many tokenized assets currently exist on different blockchains or closed networks, which reduces liquidity.In addition, the true liquidity of institutions also depends on market confidence.Large institutions need to ensure that these tokens represent an enforceable interest in the underlying assets and that settlement finality is guaranteed.Still, we should remain optimistic.As standards harmonize and infrastructure matures, tokenization will unlock liquidity in everything from private equity to infrastructure projects by making the secondary transaction process more seamless.In the interim, we encourage the industry to develop shared standards and cross-platform integration solutions to avoid liquidity being trapped in a single blockchain or jurisdiction.
For institutional players, what strategies can drive adoption and liquidity in tokenized markets?
Institutional adoption of tokenized markets ultimately depends on regulatory, custody and infrastructure maturing in tandem.Regulatory harmonization is fundamental; institutions need consistent legal definitions of ownership, custody, settlement and asset classification to operate confidently across borders.Otherwise, tokenized markets cannot scale because institutions will face uncertainty about legal effectiveness, risk response, and the ability to trade seamlessly across jurisdictions.
The hosting model is also evolving rapidly.As highlighted in the report “Interpreting Digital Asset Custody” jointly released by the Global Federation for Digital Finance (GDF), the International Swaps and Derivatives Association (ISDA) and Deloitte, most institutional-level custody frameworks already exist, especially in terms of customer asset isolation, key management and operational control.The report notes that many of the principles of traditional custody can and should be applied to digital assets, but new capabilities are also needed to manage risks, such as wallet management, distributed ledger technology (DLT) network governance, and effective segregation of customer and company assets.
Capital treatment is another important consideration.Capital treatment refers to the way tokenized asset exposures are classified under prudential regulatory frameworks (such as the Basel Committee’s crypto-asset standards), which determines how much regulatory capital banks need to hold.Recent reviews of Basel standards have further highlighted the distinction between tokenized traditional assets and higher-risk crypto-assets.Under this framework, fully reserved and regulated tokenized assets, such as tokenized money market funds, should be classified in Group 1a and thus enjoy the same capital treatment as their non-tokenized counterparts.
Interoperability is another key enabler.Today’s fragmented ecosystem slows down liquidity, so common standards and cross-platform settlement channels are crucial.Early projects like Fnality and various central bank digital currency (CBDC) pilot projects have proven that atomic, near-instant settlement can reduce friction.The work of GDF TMMF provides concrete evidence of this.In the industry sandbox, TMMF is transferred between multiple heterogeneous distributed ledger technologies (DLT) and traditional systems, including Ethereum, Canton, Polygon, Hedera, Stellar, Besu, and institutional cash networks such as Fnality, demonstrating that tokenized funds can flow freely between platforms.Simulation 6 further extends this to traditional payment channels, linking SWIFT messages into the tokenized collateral workflow and completing a complete bilateral to tri-party repurchase cycle in less than a minute.Together, these findings demonstrate that interoperability is already achievable in practice and, once implemented in markets, can support large-scale liquidity.
Looking to the future,What will be the most transformative impact of tokenization in 2026?
In 2026, tokenization will begin to reshape the daily operations of the market.The most immediate shift is towards programmable settlement, and in many cases even real-time settlement, powered by tokenized cash, stablecoins or central bank digital currencies (CBDC).
We also expect that traditionally illiquid assets will be more readily accepted by the market.In areas such as private equity, infrastructure and private credit, by enabling fractional property ownership, more institutional players will be able to enter these markets and increase liquidity.
At the same time, regulatory frameworks in key jurisdictions are becoming increasingly clear, providing institutions with the confidence to move from pilot projects to true integration.Custodians will expand their native role in the digital field, support the operation of smart contracts and strengthen recovery mechanisms.
