What's behind Wall Street’s Bold Embrace of Tokenization?

The finance world is no stranger to change, and Wall Street’s growing embrace of tokenization is a clear signal of the next major shift in how assets are owned, traded, and managed. Once considered the playground of crypto enthusiasts, blockchain technology and its ability to tokenize real-world assets have caught the eye of financial giants like BlackRock, JPMorgan, and Goldman Sachs. These industry behemoths are not just experimenting—they're transforming their operations to leverage the speed, security, and cost-effectiveness of tokenization.

Wall Street’s Adoption of Tokenization

BlackRock, the largest asset manager globally, unveiled its first tokenized mutual fund, the USD Institutional Digital Liquidity Fund, in early 2024, marking a significant milestone. The fund, which holds over $500 million in assets including U.S. Treasury bills, is tokenized on the Ethereum blockchain, enabling faster and more transparent trading. Other major players like JPMorgan have developed their own tokenization networks, allowing assets like shares in money market funds to be converted into digital tokens and used as collateral for financial trades. Franklin Templeton is also managing tokenized funds, signaling the growing trend of using blockchain to modernize and expand traditional financial services.

This convergence of traditional finance and blockchain technology is not only a technological evolution but also a financial one. Wall Street sees the potential to cut costs, increase trading speed, and broaden market access through the use of tokenized assets, and they are pouring vast resources into making it a reality.

The Future of Tokenized Finance

The CEO of BlackRock, Larry Fink, has repeteadly described the tokenization of financial assets as the next major step in the technological revolution of markets. As we approach 2025, tokenization is poised to become a standard practice in both private and public markets.

Tokenization is the process of representing traditional financial assets—such as stocks, bonds, real estate, or even luxury items like art—on a blockchain. A single token can represent fractional ownership, which can be bought, sold, and transferred with minimal friction, creating a more liquid and accessible market. By tokenizing assets, intermediaries like brokers and custodians can be bypassed, allowing for direct and instantaneous transfers between owners, often outside of regular market hours.

This process also enables the fractional ownership of high-value assets, democratizing access to investments that would otherwise be out of reach for most people. According to McKinsey, the tokenized asset market, excluding stablecoins, could grow to $2 trillion by 2030, driven primarily by tokenized bonds, mutual funds, and other financial instruments. The World Economic Forum projects an even more staggering figure, estimating that 10% of global GDP could be tokenized by 2030.

Why Wall Street is All In: Efficiency, Liquidity, and Security

Financial institutions are drawn to the tokenization model for its efficiency. Traditional trading systems often require multiple intermediaries to clear, settle, and record transactions. With tokenization, assets can be traded directly on blockchain networks, drastically reducing settlement times—from the standard two days (T+2) to instant settlement (T+0). Moreover, by using programmable smart contracts, tokenized assets can be designed to automatically transfer ownership once pre-specified conditions are met, further simplifying the process.

Cost reduction is another key advantage. Financial companies could see savings of over 40% by adopting blockchain solutions for settlement and custody services. Moreover, as mentioned aboved tokenized securities introduce greater liquidity into markets that are traditionally less liquid, such as private equity, real estate, and corporate bonds. With tokenization, these assets can be traded more easily, opening up new opportunities for both institutional and retail investors.

The Growing Market for Tokenized Assets

Tokenization is not limited to institutional investors and high-net-worth individuals; it offers a broader range of opportunities for retail investors and small to medium enterprises (SMEs). SMEs, which often struggle with accessing traditional funding sources, can tap into new pools of capital through tokenized securities. In fact, Token City is leading the way in improving access to capital for businesses worldwide, especially for SMEs, while also offering more liquid and accessible investment options for retail investors.

Token City’s solutions have been deployed across a variety of sectors and geographies, enabling clients to tokenize assets ranging from real estate in South America and energy projects in the North America to artists’ royalties in Spain, and many more use cases. With the ability to issue, manage, and trade tokenized assets, Token City helps financial institutions and companies unlock new liquidity and efficiency.

For financial institutions, investors, and companies alike, tokenization represents an opportunity to rethink how we manage and trade value. As tokenized markets grow, they offer new levels of liquidity, security, and accessibility, making it easier for investors of all sizes to participate in a more democratic financial ecosystem.

The entire financial industry, including Wall Street, is preparing for disruption. Those who embrace tokenization early can position themselves at the forefront of this exciting transformation.