Tokenization is rapidly becoming the core driving force behind the evolution of financial infrastructure, with impacts that may extend beyond short-term fluctuations, touching on the deeper logic of market structure, liquidity, and global capital flows.

Written by: Paula Albu

Translated by: AididioJP, Foresight News

In a recent interview, Fabienne van Kleef, a senior analyst at Global Digital Finance, delved into the current state of tokenized assets, their application scenarios, and their potential to reshape financial markets. She pointed out that tokenization is quickly becoming the core driving force behind the evolution of financial infrastructure, with impacts that may extend beyond short-term fluctuations, touching on the deeper logic of market structure, liquidity, and global capital flows.

How do you view the trend of tokenization, which some (like BlackRock's CEO) claim may surpass the importance of artificial intelligence in the future?

Paula Albu: Yes, tokenization is emerging as a transformative force in the financial sector. According to industry research from 21.co, the market size for tokenized assets has grown from $8.6 billion in 2023 to over $23 billion by mid-2025. Predictions indicate that the potential total market for asset tokenization, covering bonds, funds, real estate, and private markets, could reach hundreds of trillions of dollars within a decade. BlackRock CEO Larry Fink has stated that the impact of tokenization may even surpass that of artificial intelligence, highlighting the significant importance of this trend. Tokenization is reshaping how value is represented and transferred, with impacts comparable to how the internet transformed information exchange. With a solid foundation, tokenization is expected to profoundly reshape the global financial system.

What are the main application scenarios and challenges facing tokenized assets today?

Paula Albu: Currently, the most active applications of tokenization are concentrated in financial instruments where efficiency and liquidity are crucial. Tokenized money market funds and bonds are typical examples. These funds can now operate on multiple blockchains, achieving near-instant settlement of trades and supporting new cash management processes that allow for fund subscriptions and redemptions using stablecoins. The tokenization of sovereign debt, real estate, and private credit as use cases for real-world assets is also advancing. The advantages lie in supporting fragmented ownership and providing an around-the-clock trading market, thereby opening up investment channels for traditionally illiquid assets and enhancing their liquidity.

However, challenges remain. While regulatory and legal frameworks are steadily catching up, progress varies across different jurisdictions, leading to uncertainty. Countries have differing legal recognitions of digital asset custody or blockchain records, meaning tokenized assets may face different treatments when crossing borders. From a technical perspective, interoperability and asset security remain focal points, although many interoperability challenges have been proven solvable. The industry sandbox testing by Global Digital Finance on tokenized money market funds demonstrates this, showcasing successful practices in cross-platform transfers. In summary, tokenization has created value in key financial areas such as fund management and the bond market, but further coordination of rules and extensive upgrades to existing institutional infrastructure are needed to address these challenges.

How does tokenization affect the US dollar and traditional foreign exchange markets?

Paula Albu: Tokenization is blurring the lines between traditional currencies and value transfer, with the US dollar at the center of this transformation. Most stablecoins are explicitly backed by US dollars and short-term US Treasury securities, further driving the dollarization of cross-border payments. By 2025, the reserves backing major dollar stablecoins (primarily US Treasuries) will be so substantial that the total amount held by stablecoin issuers will exceed that of countries like Norway, Mexico, and Australia.

For the traditional foreign exchange market, the proliferation of tokenization brings both opportunities and the need for adjustments. On one hand, the emergence of digital currency forms, particularly dollar stablecoins and increasingly developed wholesale central bank digital currencies, can make foreign exchange transfers faster and more efficient. This includes achieving near-instant cross-currency transaction settlements without relying on correspondent banking networks.

However, regulation remains a key factor regardless of how developments unfold. Governments want to ensure that stablecoins can circulate as a trusted form of currency across different markets. For example, the recently passed GENIUS Act in the US clarifies the reserve and redemption requirements for dollar payment stablecoins, providing much-needed regulatory clarity, which we expect will enhance market confidence in the widespread use of tokenized dollars.

Overall, tokenization is not expected to completely replace traditional currencies; rather, it may lead to a foreign exchange environment where the influence of the dollar remains strong or even potentially increases. Settlements will trend towards real-time, and markets will need to adapt to a new system where sovereign currencies and their digital token versions flow seamlessly across interoperable networks.

What happens when every company or institution uses digital wallets to manage tokenized assets?

Paula Albu: If in the future every company holds digital wallets for managing tokenized assets, we will face a radically different financial landscape: greater interconnectivity, instant transactions, and a higher degree of decentralization. In this scenario, the roles of asset custodians and wallet providers will become crucial. They will evolve from mere asset custodians to core infrastructure and key service providers, ensuring the security, compliance, and interoperability of wallets and their internal assets.

From a practical perspective, the widespread use of digital wallets means that value can flow through the network as easily as email. Real-time settlements will significantly reduce counterparty risk and free up capital. Corporate finance officers will be able to directly manage tokenized bonds or receivables, engaging in peer-to-peer trading or lending activities with minimal friction. Of course, this requires the establishment of universal protocols, a regulated digital identity framework, and clear legal status for on-chain transactions.

How does tokenization impact the secondary market and liquidity for institutional investors?

Paula Albu: Tokenization has the potential to greatly enhance liquidity in the secondary market, especially for assets that have historically been illiquid or complex to trade. By converting assets into digital tokens, fragmented ownership and near-around-the-clock trading become possible, thereby expanding the pool of potential buyers and sellers. Evidence of this is already seen in practice: the settlement of tokenized funds and government bonds can be completed almost instantaneously, compared to several days in traditional models, allowing investors to reallocate capital more quickly. Recent analysis by Global Digital Finance shows that the settlement of tokenized money market fund units takes only seconds, while traditional money market funds typically require one to three days for settlement.

However, it is important to note that in the early stages, liquidity in the tokenized market may be relatively fragmented. Many tokenized assets currently exist on different blockchains or closed networks, which can limit liquidity. Additionally, the true liquidity required by institutional investors depends on market confidence. Large participants need to be assured that these tokens represent legitimate claims on the underlying assets and that settlements have finality. Nevertheless, the outlook is optimistic. As standards unify and infrastructure matures, tokenization will release liquidity across various asset classes, from private equity to infrastructure projects, by making secondary trading smoother. Currently, we encourage the industry to develop shared standards and cross-platform integration solutions to prevent liquidity from being trapped in a single chain or jurisdiction.

What strategies can drive institutional participants to adopt the tokenized market and enhance its liquidity?

Paula Albu: The key to institutional adoption of the tokenized market lies in the coordinated development and maturation of regulation, custody, and infrastructure. Regulatory coordination is foundational. Institutions need a set of cross-border consistent legal definitions regarding ownership, custody, settlement, and asset classification to operate with confidence. Without this, the tokenized market cannot scale, as institutions will face uncertainties regarding legal enforceability, risk management, and the ability to conduct seamless cross-border transactions.

Custody models are also rapidly evolving. As highlighted in the report "Decoding Digital Asset Custody" jointly published by Global Digital Finance, the International Swaps and Derivatives Association, and Deloitte, most institutional-grade custody frameworks have begun to take shape, particularly in areas such as client asset segregation, key management, and operational controls. The report notes that many principles of traditional custody can and should be applied to digital assets, while new capabilities must be introduced to manage risks such as wallet management, governance of distributed ledger networks, and effective segregation of client and company assets.

Capital treatment is another important consideration. This refers to how the risk exposure of tokenized assets is classified according to prudential frameworks such as the Basel Committee's "Prudential Standards for Crypto Assets," which determines the amount of regulatory capital banks must hold. Recent reviews of this standard have further clarified the distinction between tokenized traditional assets and high-risk crypto assets. Under this framework, fully reserved and regulated tokenized assets (such as tokenized money market funds) should fall into Group 1a, thereby receiving the same capital treatment as their non-tokenized counterparts.

Interoperability is another key catalyst. The fragmentation of the current ecosystem limits liquidity, making universal standards and cross-platform settlement tracks essential. Initiatives like Fnality and various central bank digital currency pilot projects have already demonstrated that atomic, near-instant settlements can reduce friction. The tokenized money market fund project by Global Digital Finance provides a concrete example. In its industry sandbox, tokenized money market fund units successfully transferred across multiple heterogeneous distributed ledgers and traditional systems (including Ethereum, Canton, Polygon, Hedera, Stellar, Besu, and Fnality's institutional cash networks), proving that tokenized funds can flow freely between platforms. Subsequent simulation tests further connected the SWIFT messaging system with tokenized collateral workflows, completing a full cycle from bilateral to tri-party repos in under a minute. These results indicate that interoperability is already feasible in practice and, once widely adopted by the market, can support large-scale liquidity.

Looking ahead, what do you think will be the most transformative impacts of tokenization by 2026?

Paula Albu: By 2026, tokenization will begin to deeply influence the daily operations of markets. The most direct change will be a shift towards programmable and often real-time settlements, driven by tokenized cash, stablecoins, or central bank digital currencies.

We anticipate that traditionally illiquid assets will gain broader investment channels. The fragmentation in areas such as private equity, infrastructure, and private credit will open these markets to a wider range of institutional participants and enhance their liquidity.

At the same time, regulatory frameworks in major jurisdictions will become clearer, providing institutions with the confidence to transition from pilot projects to full integration. Custodians will expand their digital-native service capabilities, supporting smart contract operations and strengthening asset recovery mechanisms.

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