Beyond crypto: how tokenization is quietly rewiring markets

Graduate Analyst at Global Digital Finance, Fabienne van Kleef, discusses tokenized assets and their broader impact on financial markets.

Tokenization is growing rapidly, with some (BlackRock CEO) claiming it could surpass AI in significance. How do you see this trend?

Yes, tokenization is emerging rapidly as a transformative force in finance. According to industry research from 21.co, the tokenized asset market expanded from USD 8.6 billion in 2023 to over USD 23 billion by mid-2025. Predictions forecast that the total addressable market for asset tokenization, across bonds, funds, real estate, and private markets, could reach the tens of trillions within a decade. BlackRock’s CEO Larry Fink says that tokenization could have a greater impact than AI, underscoring how truly significant this trend is. Tokenization is reshaping how we represent and transfer value, comparable to how the internet reshaped information exchange. With the right foundations, tokenization is positioned to meaningfully reshape global finance.

What are the primary use cases and challenges of tokenized assets today?

Today’s most active tokenization use cases centre around financial instruments where efficiency and liquidity play a major role. A prime example is tokenized money market funds and bonds. Tokenized money market funds and government bond funds already operate across multiple blockchains. These allow near-instant settlement of trades and new cash management workflows using stablecoins for fund subscriptions and redemptions. Sovereign debt, real estate, and private credit are also advancing as real-world asset use cases. The benefits here lie in fractional ownership and around-the-clock markets, which can open up investment access and liquidity in traditionally illiquid assets.

That said, there are still challenges to overcome. Regulatory and legal frameworks are steadily catching up, though progress varies by jurisdiction and can create pockets of uncertainty. Differences in how countries define digital asset custody or recognise blockchain records mean a tokenized asset may be treated differently across borders. From a technical perspective, interoperability and asset-safeguarding remain priorities, though many interoperability challenges are already proving solvable. This was demonstrated in the GDF Tokenized Money Market Fund (TMMF) report’s industry sandbox, which showed cross-platform transfers working successfully in practice. Ultimately, tokenization is already delivering value in key areas of financial services such as fund management and bond markets, but scaling those successes will require further harmonisation of rules and a wider upgrade of existing institutional infrastructure to address these challenges.

How does tokenization impact the US dollar and traditional FX markets?

Tokenization is blurring the lines between traditional currencies and value transfer, with the US dollar at the epicentre of this shift. Most stablecoins are explicitly backed by US dollars and short-dated Treasuries, driving further dollarisation in cross-border payments. In 2025, the reserves backing major dollar stablecoins (largely held in US Treasuries) grew so large that stablecoin issuers collectively held more US Treasuries than some countries, such as Norway, Mexico, and Australia.

For traditional FX markets, widespread tokenization introduces opportunities as well as adjustments. On the one hand, the emergence of digital forms of money, particularly USD-backed stablecoins and increasingly wholesale CBDCs, can make foreign exchange transfers faster and more efficient. This includes round-the-clock, near-instant settlement of cross-currency trades without relying on correspondent banks. 

However, across these various developments regulation is still a key factor as governments are keen to ensure stablecoins can be trusted across markets if they are to truly function as money. In the US the recent GENIUS Act provided much-needed clarity for dollar-backed payment stablecoins by defining reserve and redemption requirements, which we expect to boost confidence in using tokenized dollars at scale.

Overall, tokenization is not expected to fully replace traditional currencies, but instead, it may lead to an FX environment in which the dollar’s influence remains strong or potentially expands. Settlement could become real-time, and markets would need to adjust to a system where sovereign currencies and their digital token versions move fluidly across interoperable networks.

What happens when every company or institution uses a digital wallet for tokenized assets?

If we reach a point where every company holds a digital wallet for tokenized assets, we will look at a very different financial landscape that is more interconnected and instantaneous, and less central. In such a scenario, the role of custodians and wallet providers becomes critically important. Custody providers would evolve from safekeepers to essential infrastructure and critical service providers, ensuring safety, compliance, and interoperability of wallets and the assets within them.

From a practical perspective, universally used digital wallets would mean value can move as easily as an email across a network. Settlements could occur in real time, dramatically reducing counterparty risk and freeing up capital. Corporate treasurers could handle assets (like tokenized bonds or invoices) directly, executing transactions or lending activities peer-to-peer with minimal friction. There is a necessity for common protocols, regulated digital identity frameworks, and a clear legal status for on-chain transactions.

How does tokenization influence secondary markets and liquidity for institutional investors?

Tokenization has the potential to greatly enhance liquidity in secondary markets, especially for assets that historically have been illiquid or complex to trade. By converting assets into digital tokens, fractional ownership and near around-the-clock trading become possible, widening the pool of potential buyers and sellers. We are already seeing this in practice. Tokenized funds and Treasuries settle almost instantly rather than days, thereby allowing investors to reinvest capital more rapidly. Recent GDF analysis shows that TMMF units can settle in seconds, compared to the one-to-three-day settlement cycles typical of traditional money market funds.

However, there are caveats. In these early stages, liquidity in tokenized markets can be fragmented. Many tokenized assets currently exist on different blockchains or within closed networks, which can reduce liquidity. Furthermore, true liquidity for institutions requires market confidence. Large players need assurance that these tokens represent enforceable claims on the underlying assets and that settlement finality is assured. Nevertheless, we should be optimistic. As standards align and infrastructure matures, tokenization will unlock liquidity in everything from private equity to infrastructure projects by making secondary trading more seamless. In the interim, we’re encouraging the industry to develop shared standards and cross-platform integrations so that liquidity isn’t trapped in one chain or jurisdiction.

What strategies can drive adoption and liquidity in tokenized markets for institutional participants?

Institutional adoption of tokenized markets ultimately depends on aligning regulation, custody, and infrastructure to mature together. Regulatory harmonisation is the foundation; institutions need a consistent legal definition of ownership, custody, settlement, and asset classification to operate confidently across borders. Without that, tokenized markets can’t scale, because institutions face uncertainty around legal enforceability, risk treatment, and their ability to transact seamlessly across jurisdictions.

Custody models are also evolving quickly. As highlighted in the GDF, ISDA, and Deloitte report Digital Asset Custody Deciphered, most institutional-grade custody frameworks already exist, particularly around segregation of client assets, key management, and operational controls. The report notes that many of the principles from traditional custody can and should be applied to digital assets, while new capabilities are needed to manage risks such as wallet management, governance of DLT networks, and effective segregation of client and firm assets.

Capital treatment is another important consideration. By capital treatment, we refer to how exposures to tokenized assets are classified under prudential frameworks such as the Basel Committee’s Cryptoasset Standard, which determines how much regulatory capital banks must hold. The recent review of the Basel standard reinforced the distinction between tokenized traditional assets and higher-risk cryptoassets. Under this framework, fully reserved and regulated tokenized assets, such as tokenized money market funds, should fall within Group 1a so that they receive the same capital treatment as their non-tokenized equivalents.

Interoperability represents another critical catalyst. Today’s fragmented ecosystem slows liquidity, so common standards and cross-platform settlement rails are crucial. Early initiatives such as Fnality and various CBDC pilots already demonstrate how atomic, near-instant settlement can reduce friction. The GDF TMMF work provides concrete evidence of this. In the industry sandbox, TMMFs were transferred across multiple heterogeneous DLTs and legacy systems, including Ethereum, Canton, Polygon, Hedera, Stellar, Besu, and institutional cash networks such as Fnality, showing that tokenized funds can move fluidly between platforms. Simulation 6 then extended this to legacy payment rails, linking SWIFT messages into a tokenized collateral workflow and completing a full bilateral-to-tri-party repo cycle in under one minute. Together, these findings show that interoperability is already achievable in practice and can support large-scale liquidity once adopted across markets.

Looking forward, what do you see as the most transformative effects of tokenization in 2026?

In 2026, tokenization will start shaping the day-to-day functioning of markets. The most immediate shift is the move toward programmable and, in many cases, real-time settlement, enabled by tokenized cash, stablecoins, or CBDCs.

We also expect to see broader access to traditionally illiquid assets. Fractionalisation in areas like private equity, infrastructure, and private credit will open these markets to a wider set of institutional participants and improve liquidity.

At the same time, regulatory frameworks across major jurisdictions are becoming clearer, giving institutions the confidence to move from pilots to true integration. Custodians will expand into digital-native roles, supporting smart-contract operations and strengthening recovery mechanisms.

About author

Fabienne is a Graduate Analyst at Global Digital Finance, focusing on tokenization, digital asset market structure, and global regulatory alignment. She translates emerging on-chain developments into practical insights for industry and policymakers. Previously, she led a fintech serving capital markets clients, founded an AI-driven venture, and worked in regulatory research at Hogan Lovells in Paris. With a background in analytics and data science, she bridges technical innovation with strategic real-world impact.

About GDF