Tokenisation Has Proved the Concept. Now It Needs the Plumbing.

Digital Plumbing evolving

The debate about whether tokenisation works has largely been settled. The harder question, the one that will define the next two years, is whether the financial system's underlying infrastructure can support a transition from carefully managed pilots to genuine production scale.

From Proof of Concept to Production Problem

2025 was, by most measures, the year institutional tokenisation stopped being theoretical. The EU's MiCA framework became operational. The United States passed the GENIUS Act, providing the first federal framework for stablecoins after years of legislative stasis. BlackRock's BUIDL fund and Franklin Templeton's BENJI demonstrated that tokenised fund shares and Treasury bills can function under institutional conditions and at meaningful scale. The question that animated most of 2024, whether tokenised assets would actually work, has largely been answered.

What has replaced it is more structural and, in some ways, more difficult to resolve. The constraint on tokenisation in 2026 is no longer regulatory permission in principle; it is operational readiness in practice. The ability to move, safeguard, and reconcile tokenised assets at scale, across time zones, across jurisdictions with different insolvency regimes, and through periods of market stress, has become the limiting factor. Infrastructure that was adequate for pilots is not necessarily adequate for production.

For UK investors and founders watching this market, that distinction matters. The UK's own regulatory architecture, built around the FCA's Digital Securities Sandbox and the digital securities provisions of FSMA 2023, is designed precisely for this transition: from controlled experimentation to broader deployment. The infrastructure question being confronted globally is the same one that will determine how quickly that architecture delivers usable results domestically.

Counterparty Risk Has Replaced Regulatory Risk

The risk profile of tokenisation has shifted in a way that is not yet fully reflected in how institutions discuss it. Regulatory risk, the fear that a product would simply not be legally permissible, has receded as a primary concern across most major markets. What has taken its place is a more operational class of problem: how does capital settle when traditional banking systems are unavailable? How is counterparty exposure managed when assets move across jurisdictions operating under different insolvency rules? What happens to client assets if a custody provider fails?

These are not novel questions in financial services. They are the same questions that treasury and operations teams have applied to money market funds and prime brokerage relationships for decades. What is new is that the tokenisation market has been relatively slow to apply the same analytical rigour to its own instruments. Stablecoins, in particular, are frequently treated as interchangeable on the basis of their unit price, when their underlying reserve quality and counterparty risk profiles diverge considerably. The assumption that a stablecoin is safe because it is stable is not a sufficient basis for institutional deployment.

As tokenised assets move from pilot programmes toward production use, governance needs to follow. Boards deploying capital into tokenised instruments should be asking practical questions: whether assets can be custodied and settled continuously across jurisdictions, whether settlement processes have been tested under stressed conditions, and whether counterparty exposure to stablecoin issuers has been analysed with the same discipline applied to any other credit relationship.

Build, Buy, or Partner: The Infrastructure Trilemma

Every institution entering the tokenised asset market faces a version of the same decision. They can build infrastructure in-house, typically a three-to-five year process requiring capital commitments that routinely exceed ten million pounds. They can acquire capability through M&A, which generally requires eighteen to twenty-four months to reach production readiness and carries meaningful integration and valuation risk. Or they can partner with established infrastructure providers and become operational within six to twelve months, at the cost of some operational dependency.

What the 2025 consolidation wave confirmed is that infrastructure is genuinely a bottleneck, and that the M&A route is slower than it appears. Major acquisitions in the sector, including Coinbase's acquisition of Deribit and Kraken's acquisition of NinjaTrader, have publicly indicated integration cycles of twelve to twenty-four months. In practice, cultural and operational differences between crypto-native businesses and traditional financial institutions have compounded execution timelines further. The institutions that appear best positioned are those that chose partnership models early, deploying shared infrastructure that was already production-ready rather than absorbing multi-year integration programmes while competitors established market presence.

The cost of delay deserves careful consideration. For a fund evaluating tokenised treasury management, the opportunity cost is not simply foregone yield; it is competitive positioning. Early movers are building track records, establishing distribution relationships, and shaping the expectations of institutional clients around how tokenised products should function. Those timelines compound. The institutions that resolve their infrastructure strategy in the first half of 2026 are likely to be operating in a materially different competitive position by the end of it.

The Liquidity Paradox

One of the most cited advantages of tokenised assets is continuous liquidity: a tokenised bond or fund share is, in principle, tradeable at any hour, on any day. The practical reality is more conditional. Liquidity only exists where it concentrates, and for institutional participants, concentration is determined by custody access. A tokenised instrument that is theoretically tradeable around the clock becomes functionally illiquid if the custody infrastructure of its holder cannot access the exchanges or settlement networks where the majority of volume actually transacts.

This is the liquidity paradox that institutions are beginning to confront. Tokenised T-bills offering continuous access and yields in the region of five percent represent a genuinely attractive alternative to restricted bank deposits for corporate treasuries managing significant cash positions. Franklin Templeton's BENJI has approached nine hundred million dollars in assets under management; BlackRock's BUIDL has exceeded two trillion dollars. Competing products from major asset managers are following. But the custody infrastructure required to access these instruments under banking supervision, with multi-jurisdiction licensing, is concentrated among fewer than a dozen providers globally, most of whom carry onboarding backlogs.

Cross-border complexity adds a further layer. Tokenised assets are globally accessible by design, but custody arrangements, tax treatment, and reporting obligations remain jurisdiction-specific. Cross-border flows still require custodians licensed in each investor market. For UK institutions, this is not merely an abstract structural point; it is the practical reason why instruments such as Kraken's VCXx tokenised venture fund are currently unavailable to UK retail investors, despite being accessible to eligible international participants. The product exists; the regulated pathway to deliver it in the UK does not yet.

What This Means for the UK

The UK sits in an interesting position relative to the infrastructure debate. Its regulatory architecture is being constructed deliberately and with clear intent: the Digital Securities Sandbox provides a controlled environment for live testing, while FSMA 2023's digital securities provisions lay the foundation for a permanent framework. The FCA's February 2026 guidance extending retail access to crypto exchange-traded notes through regulated venues reflects a regulator moving methodically rather than reactively.

The gap, at present, is on the infrastructure side rather than the regulatory side. The custody and settlement capabilities required to support production-scale deployment of tokenised securities in the UK are still being built, and the international providers with the most developed infrastructure are primarily oriented toward US and EU markets. The question for UK institutions and founders building on this stack is not whether the regulatory framework will exist; it is whether the operational infrastructure will be in place in time to capture the first wave of commercial activity.

Interoperability is the underlying constraint that ties these threads together. The tokenisation market, as it currently stands, resembles the early railroad networks: technically impressive, commercially promising, and structurally fragmented. Different platforms, custody providers, and settlement networks operate with incompatible standards. Until those standards converge, or until a sufficient number of institutions are pre-positioned with custody access across the networks that matter, the promise of continuous, borderless liquidity will remain only partially realisable.

The infrastructure that makes tokenisation useful at scale is being built; the advantage in 2026 belongs to the institutions that do not wait until it is finished to decide where they stand.

Disclaimer: This article is provided for general information only and does not constitute legal, financial, or investment advice. The regulatory treatment of tokenised assets and digital securities varies by jurisdiction and continues to evolve. Readers should seek independent professional advice before making any financial, legal, or regulatory decisions.