Why Major Financial Institutions Are Betting on Tokenisation

A quiet shift in the infrastructure of global finance

Over the past decade, the conversation around blockchain and digital assets has often been dominated by cryptocurrencies and retail speculation. Yet behind the headlines, a more structural transformation has been quietly gaining momentum within the financial industry itself.

Betting on the Future of Finance

Major banks, asset managers and market infrastructure providers are increasingly exploring tokenisation as a way to modernise how financial assets are issued, traded and settled. For institutions responsible for managing trillions in global capital, the attraction is not ideological. It is operational.

For the UK, the stakes are particularly high. The country is the second-largest asset management centre in the world, holding 12% of global assets under management. The UK investment management industry recently hit a new peak of £10 trillion in AUM, with around 2,600 FCA-regulated firms managing assets for UK and global clients. London alone accounts for 38% of global foreign exchange turnover - more than any other city on earth. The financial services sector contributes approximately 9% of UK economic output and supports 1.2 million jobs nationwide. TheCityUK | The Global City

Traditional financial markets rely on complex layers of intermediaries. Clearing houses, custodians, settlement systems and registry operators all play important roles in maintaining trust and stability. However, these systems were largely built decades ago and can involve multiple steps, delays and reconciliation processes.

Tokenisation introduces the possibility of representing financial assets digitally on shared infrastructure where ownership records, transactions and settlement processes are synchronised automatically. In theory, this could reduce operational friction, improve transparency and enable assets to move more efficiently across markets.

For institutions operating at global scale, even modest efficiency gains can translate into significant financial impact so, with so much at stake, it's therefore not a surprise that the major financial institutions are betting on tokenisation

From Experimentation to Institutional Pilots

In the early years of blockchain technology, many financial institutions adopted a cautious stance. Pilot programmes were launched to explore the technology, but large-scale adoption remained limited.

That picture has changed completely. Global asset managers are now issuing tokenised versions of traditional financial instruments, including government securities and money market funds. BlackRock's USD Institutional Digital Liquidity Fund (BUIDL), launched on the Ethereum blockchain in March 2024, has grown to over $2.9 billion in assets under management and has distributed more than $100 million in dividends to token holders, a clear signal that institutional-grade tokenised finance is no longer theoretical. Forbes

Major banks are developing blockchain-based settlement infrastructure for cross-border payments and collateral transfers. JP Morgan's Kinexys Tokenized Collateral Network allows institutions to transfer collateral ownership without moving assets in underlying ledgers, settling repo transactions in minutes rather than days. Stock exchanges and regulated digital exchanges like tZERO - which operates as a fully licensed US broker-dealer - are actively developing infrastructure to support the issuance and trading of private market assets for the wider, mainstream marketplace. JP Morgan

These initiatives signal an important shift. Tokenisation is increasingly being viewed not as a niche digital asset experiment, but as a potential upgrade to ageing financial market infrastructure. According to a joint report by Boston Consulting Group and Ripple, the tokenised asset market is projected to grow from approximately $600 billion today to $18.9 trillion by 2033 - a compound annual growth rate of 53%. Even the more conservative McKinsey & Company forecast puts the market at close to $2 trillion by 2030. BCG/Ripple | McKinsey via Ledger Insights

The Emergence of Regulated Digital Asset Exchanges

Alongside institutional pilots, a number of regulated platforms have emerged that allow investors to trade tokenised financial instruments.

One example is Swarm Markets, a Germany-based platform operating under European financial regulation, licensed by BaFin (Germany's Federal Financial Supervisory Authority). It was the first DeFi platform to comply with EU prospectus regulation, and today offers tokenised equities, bonds and other real-world assets. CoinMarketCap

Closer to home, Archax - headquartered in London, holds the distinction of being the UK's first FCA-regulated digital securities exchange, broker and custodian. It has partnered with Federated Hermes to offer tokenised UCITS Money Market Funds, and in a landmark first, completed the UK's inaugural public blockchain transaction using tokenised sterling deposits in partnership with Lloyds Bank. Archax

In Switzerland, SIX Digital Exchange (SDX) operates as the world's first fully regulated financial market infrastructure for the issuance, trading, settlement and custody of digital securities. To date, it has supported the issuance of approximately $3.1 billion (CHF 2.5 billion) in digital bonds. Bloomberg

These exchanges are not designed to replicate the open crypto trading environment that developed during the early blockchain era. Instead, they operate within established financial regulation and investor protection frameworks. The goal is to bring digital asset infrastructure into the regulated financial system rather than building parallel markets outside it.

Why Institutions Are Interested

For large financial institutions, the appeal of tokenisation rests on three potential advantages.

The first is settlement efficiency. Traditional securities transactions often take several days to settle, particularly across international markets - a problem with a measurable price tag. Bloomberg Intelligence has estimated that settlement delays cost investors more than $30 billion per year in lost opportunity, while research firm Firebrand has calculated that settlement failures cost the industry $161.63 billion in 2021 alone during peak market volatility.

The US took a significant step in May 2024 by moving from T+2 to T+1 settlement for most securities; European markets are now navigating the same transition. Digital asset infrastructure could eventually enable near-instantaneous settlement, sharply reducing counterparty risk and freeing up trapped capital. Bloomberg/TokenFi | PostTrade360

The second is collateral mobility. Financial markets depend heavily on collateral to secure transactions. Tokenised assets could potentially move more easily across platforms and jurisdictions, improving liquidity management for financial institutions. The Bank of England has specifically highlighted this potential, noting that tokenisation could enable "near-instant movement of assets across firms and jurisdictions" and meaningfully lower firm operating costs while increasing system-wide liquidity. Bank of England

The third is programmability. Digital securities can be designed to execute certain actions automatically when predefined conditions are met. This could simplify processes such as interest payments, dividend distributions or compliance checks.

None of these benefits require changing the underlying legal rights attached to financial assets. Instead, they focus on improving how those rights are administered and transferred.

A Gradual Integration with Traditional Finance — Led in Part by London

Despite growing interest, complete institutional adoption of tokenisation cannot happen overnight. Financial markets are built on trust, legal certainty and regulatory oversight. Any changes to the infrastructure that supports these markets must be introduced carefully to avoid destabilising the system.

The UK has positioned itself at the vanguard of this careful integration. The Bank of England and FCA jointly operate the Digital Securities Sandbox (DSS), enabling firms to test the issuance, trading and settlement of securities on distributed ledgers within a supervised environment.

The Bank of England confirmed in early 2025 that the DSS, systemic stablecoins and tokenised collateral are its three top innovation priorities for 2026. In a significant legal milestone, the UK passed the Property (Digital Assets etc) Act 2025, clarifying the legal status of digital assets as property -

an essential foundation for their use as collateral. Bank of England

The FCA has also committed to supporting tokenisation with a clear ambition: "The UK has the opportunity to be a world-leader here," according to Simon Walls, the FCA's Executive Director of Markets. Its proposals include guidance on operating tokenised fund registers, a streamlined dealing model for tokenised authorised funds, and a roadmap for settling transactions entirely on-chain. FCA

Going further still, in September 2025, HM Treasury and the US Treasury jointly launched the Transatlantic Taskforce for Markets of the Future, drawing on regulators and industry input from both sides of the Atlantic - underscoring London's continuing role in shaping the global architecture of digital finance. Bank of England

What This Means for Private Markets

While much of the institutional focus has initially been on traditional financial assets such as bonds and funds, the implications for private markets could be significant.

As digital infrastructure becomes widely adopted within capital markets, the same systems will eventually support the issuance and transfer of private company shares. Real-world asset tokenisation already crossed $30 billion in market size as of Q3 2025, with the RWA market having grown from $8.6 billion at the start of 2025 to over $25 billion by mid-year - a 260% increase in under six months. InvestaX

For startups and early-stage investors, this could gradually reshape how private investments are structured, administered and potentially traded. Tokenisation is not transforming venture investing overnight. But it is increasingly part of a broader effort to modernise financial market infrastructure - and for a country with £14 trillion of assets under management and the world's most internationally connected capital market, the UK is extraordinarily well-placed to lead that transformation. FCA