This report provides a clear snapshot of the current state and future trajectory of asset tokenization over the next 5 to 8 years, emphasizing that now is the time for institutions to act. Rather than focusing on hype, the report identifies what’s working, what’s not, and offers guidance on how to scale beyond pilot projects. For financial institutions, tokenization is no longer optional—it is becoming a strategic imperative and a natural progression in the future of finance.
The three phases of tokenized asset adoption
Phase 1: Low-risk adoption
The first phase focuses on institutional onboarding via tokenization of familiar, regulated instruments (e.g., money market funds, corporate bonds) where operational gains are immediate and compliance is relatively straightforward. These early efforts help institutions stand up in-house infrastructure for custody, issuance, and settlement.
Phase 2: Institutional expansion
In Phase 2, institutions begin tokenizing higher-yield, more complex assets such as private credit, structured finance, and corporate bonds. These products demand flexible compliance logic, secondary market infrastructure, and broader investor access. Unlike Phase 1, which focused mainly on efficiency gains, this stage is about unlocking broader value: liquidity, composability, and yield.
Phase 3: Market transformation
Phase 3 is a system-level shift. Tokenization extends further to illiquid asset classes—private equity, hedge funds, infrastructure, and real estate-backed debt. While the timing varies by the asset class, the transition requires sufficient secondary market liquidity, acceptance of tokens as collateral in key financial workflows, regulatory frameworks supporting full lifecycle servicing (issuance, distribution, compliance), and institutional infrastructure capable of supporting custody, pricing, KYC practices, and accounting of tokenized holdings.
From hype to hard value: five tokenization use cases
1. Investment-grade Bonds: The USD 140T global bond market is burdened by high issuance costs, slow settlement, and heavy reliance on intermediaries. Tokenization addresses these frictions head-on—cutting operating costs by 40–60%, enabling near-instant settlement, and reducing systemic risk through smart contract automation.
2. Real Estate: With more than USD 300T in global asset value, real estate remains one of the most illiquid and opaque asset classes. Tokenization is taking off with institutional-grade assets—such as commercial real estate, infrastructure, and large-scale property funds—enabling fractional ownership and broader investor access over time.
3. Collateral & Liquidity Management: The USD 16T global repo and collateral markets are hindered by fragmented settlement and slow asset mobility. Tokenization enables on-chain collateral pledging, real-time transfers, and smart contract-based margin management.
4. Trade Finance & Working Capital: Despite exceeding USD 10T in volume, global trade finance is mired in paperwork and manual reconciliation. Tokenization enables real-time invoice settlement, programmable payments, and access to liquidity for SMEs and large corporations alike.
5. Treasury & Cash Management: Most corporations hold significant idle cash in low-yield accounts. Tokenization allows treasurers to deploy cash into money market funds, perform instant FX via stablecoins, and automate intraday liquidity—all while maintaining control and auditability.
Challenges and integration risk
- Adoption needs infrastructure to scale
- Institutions must align where it matters
- Regulatory progress is real, but still fragmented
- Interoperability is the weak link
- Trust will follow functionality
- Costs are falling—and increasingly strategic
- The system needs to be built for what comes next
The road ahead: a strategic playbook for competing in tokenized finance
Track 1: System builders—shaping the infrastructure layer: System builders—global banks, custodians, and financial market infrastructure (FMI) firms—have the opportunity to shape the foundations of tokenized finance by addressing the strategic questions that will define market access, pricing, and client experience:
Track 2: Scalers and integrators—driving adoption through access and agility: Mid-sized and regional institutions won’t define the new architecture, but they can move early to secure relevance within it.
Where the tracks converge: collective action: Tokenization will not scale through isolated efforts nor through institutions building in parallel to protect legacy economics. What’s needed now is alignment—across custody, issuance, compliance, and distribution—and a collective global effort led by Tier 1 players to establish shared infrastructure the market can build on. One that’s punctuated by top-layer products built on blockchain, smart assets powered by new and improved rails, and 24/7 operations and reach. Institutions that move now and coordinate early will shape the pathways that others follow and position themselves to capture this new wave of value creation.