Written by: Paula Albu

Compiled by: AididioJP, Foresight News

In a recent interview, Fabienne van Kleef, a senior analyst at Global Digital Finance, delved into the current state, applications, and potential transformative impact of tokenized assets on financial markets. She noted that tokenization is rapidly becoming a core driver in the evolution of financial infrastructure, with effects that may extend beyond short-term volatility to touch the deeper logic of market structure, liquidity, and global capital flows.

Tokenization is developing rapidly, with some (like BlackRock's CEO) claiming its importance may surpass that of artificial intelligence in the future. What is your perspective on this trend?

Paula Albu: Yes, tokenization is rapidly emerging as a transformative force in finance. According to industry research by 21.co, the market size for tokenized assets has grown from $8.6 billion in 2023 to over $23 billion by mid-2025. Projections indicate that the total potential market for tokenizing assets—including bonds, funds, real estate, and private markets—could reach tens of trillions of dollars within a decade. Larry Fink, CEO of BlackRock, has stated that the impact of tokenization could even be greater than that of artificial intelligence, highlighting the significance of this trend. Tokenization is reshaping how value is represented and transferred, an impact comparable to how the internet reshaped information exchange. With a solid foundation in place, tokenization has the potential to profoundly reshape the global financial system.

Currently, what are the primary application scenarios and challenges facing tokenized assets?

Paula Albu: The most active applications of tokenization currently focus on financial instruments where efficiency and liquidity are critical. Tokenized money market funds and bonds are prime examples. Such funds can already operate on multiple blockchains, enabling near-instant settlement of transactions and supporting new cash management processes that use stablecoins for fund subscriptions and redemptions. Tokenization use cases for real-world assets like sovereign debt, real estate, and private credit are also advancing. The advantages include enabling fractional ownership and providing 24/7 trading markets, thereby opening up investment channels for traditionally illiquid assets and enhancing their liquidity.

However, challenges remain. While regulatory and legal frameworks are steadily catching up, progress varies across jurisdictions, creating uncertainty. Differences in the legal recognition of digital asset custody or blockchain records across countries mean tokenized assets may face different treatments when crossing borders. From a technical perspective, interoperability and asset security remain focal points, although many interoperability challenges have proven solvable. The industry sandbox testing for tokenized money market funds by the Global Digital Finance organization demonstrated this, showcasing successful practices for cross-platform transfers. In summary, tokenization is already creating value in key financial areas like fund management and bond markets, but scaling these successes requires further regulatory harmonization and extensive upgrades to existing institutional infrastructure to address the aforementioned challenges.

How does tokenization affect the US dollar and traditional foreign exchange markets?

Paula Albu: Tokenization is blurring the lines between traditional currencies and value transfer, with the US dollar at the center of this transformation. Most stablecoins are explicitly backed by reserves of US dollars and short-term US Treasuries, further promoting dollarization in cross-border payments. By 2025, the reserves (primarily US Treasuries) backing major USD stablecoins have grown so large that the collective holdings of US Treasuries by stablecoin issuers exceed those of countries like Norway, Mexico, and Australia.

For traditional foreign exchange markets, the proliferation of tokenization presents both opportunities and the need for adaptation. On one hand, the emergence of digital currency forms, particularly USD stablecoins and the growing development of wholesale central bank digital currencies (CBDCs), can make foreign exchange transfers faster and more efficient. This includes enabling 24/7, near-instant settlement of cross-currency transactions without relying on correspondent banking networks.

Regardless of developments, regulation remains a key factor. Governments want to ensure stablecoins can circulate as credible forms of money across different markets. For example, the recently passed GENIUS Act in the US clarifies reserve and redemption requirements for USD payment stablecoins, providing much-needed regulatory clarity. We anticipate this will boost confidence for the large-scale use of tokenized dollars in the market.

Overall, tokenization is not expected to completely replace traditional currencies. Instead, it may lead to a foreign exchange environment where the influence of the US dollar remains strong or potentially even strengthens further. Settlement will trend towards real-time, and markets will need to adapt to a new system where sovereign currencies and their digital token versions flow seamlessly across interoperable networks.

What happens when every company or institution uses digital wallets to manage tokenized assets?

Paula Albu: If, in the future, every company holds digital wallets for managing tokenized assets, we will face a vastly different financial landscape: one that is more interconnected, enables instant transactions, and is more decentralized. In this scenario, the roles of asset custodians and wallet providers will become critically important. They will evolve from mere asset safekeepers to core infrastructure and key service providers, ensuring the security, compliance, and interoperability of wallets and the assets within them.

From a practical standpoint, ubiquitous digital wallets mean value can flow as easily as email across networks. Real-time settlement will significantly reduce counterparty risk and free up capital. Corporate treasurers could directly manage assets like tokenized bonds or receivables, engaging in peer-to-peer trading or lending activities with minimal friction. Of course, this requires establishing universal protocols, a regulated digital identity framework, and clear legal status for on-chain transactions.

How does tokenization affect the secondary market and liquidity for institutional investors?

Paula Albu: Tokenization has the potential to significantly enhance secondary market liquidity, especially for assets that have historically been illiquid or complex to trade. By converting assets into digital tokens, fractional ownership and near-24/7 trading become possible, expanding the pool of potential buyers and sellers. We are already seeing signs in practice: settlement for tokenized funds and government bonds can happen almost instantly, rather than taking days as in traditional models, allowing investors to redeploy capital faster. Recent analysis by Global Digital Finance shows that settlement for tokenized money market fund units takes mere seconds, compared to the typical one-to-three-day settlement cycle for traditional money market funds.

However, it's important to note that in the early stages, liquidity in tokenized markets may be fragmented. Currently, many tokenized assets exist on different blockchains or within closed networks, which can limit liquidity. Furthermore, the true liquidity required by institutional investors depends on market confidence. Large participants need assurance that these tokens represent legitimate claims to the underlying assets and that settlement is final. Nonetheless, the outlook is optimistic. As standards converge and infrastructure matures, tokenization will unlock liquidity for a wide range of assets—from private equity to infrastructure projects—by making secondary trading smoother. Currently, we encourage the industry to develop shared standards and cross-platform integration solutions to prevent liquidity from being trapped on a single chain or within a single jurisdiction.

What strategies can drive institutional participation in tokenized markets and enhance their liquidity?

Paula Albu: The key to institutional adoption of tokenized markets lies in the coordinated and concurrent maturation of regulation, custody, and infrastructure. Regulatory harmonization is foundational. Institutions need a cross-border consistent set of legal definitions concerning ownership, custody, settlement, and asset classification to operate with confidence. Without this, tokenized markets cannot scale, as institutions face uncertainties regarding legal enforceability, risk treatment, and the ability to transact seamlessly across borders.

Custody models are also evolving rapidly. As highlighted in the joint report "Demystifying Digital Asset Custody" by Global Digital Finance, the International Swaps and Derivatives Association (ISDA), and Deloitte, most institutional-grade custody frameworks are taking shape, particularly concerning client asset segregation, key management, and operational controls. The report notes that many principles of traditional custody can and should be applied to digital assets, while new capabilities are needed to manage risks such as wallet management, distributed ledger network governance, and effectively segregating client and firm assets.

Capital treatment is another important consideration. This refers to how exposures to tokenized assets are classified under prudential frameworks like the Basel Committee's "Prudential Treatment of Cryptoasset Exposures," which determines the amount of regulatory capital banks must hold. Recent reviews of this standard have further clarified the distinction between tokenized traditional assets and higher-risk cryptoassets. Under this framework, fully reserved and regulated tokenized assets (like tokenized money market funds) should fall into Group 1a, receiving capital treatment equivalent to their non-tokenized counterparts.

Interoperability is another key catalyst. The current fragmentation of the ecosystem limits liquidity, making universal standards and cross-platform settlement rails crucial. Initiatives like Fnality and various central bank digital currency (CBDC) pilot projects have already demonstrated that atomic, near-instant settlement can reduce friction. Global Digital Finance's tokenized money market fund project provides a concrete example. In its industry sandbox, tokenized money market fund units were successfully transferred across multiple heterogeneous distributed ledgers and traditional systems—including Ethereum, Canton, Polygon, Hedera, Stellar, Besu, and institutional cash networks like Fnality—demonstrating that tokenized funds can flow freely between platforms. Subsequent simulation tests went further, connecting the SWIFT messaging system with tokenized collateral workflows to complete a full cycle from bilateral to tri-party repo within one minute. These results show that interoperability is already feasible in practice and, once widely adopted by the market, can support liquidity at scale.

Looking ahead, what do you believe will be the most transformative impacts of tokenization by 2026?

Paula Albu: By 2026, tokenization will begin to deeply influence the daily operations of markets. The most immediate change will be the shift towards programmable and often real-time settlement, driven by tokenized cash, stablecoins, or central bank digital currencies.

We anticipate that traditionally illiquid assets will gain broader investment access. Fractionalization in areas like private equity, infrastructure, and private credit will open these markets to a wider range of institutional participants and enhance their liquidity.

Simultaneously, regulatory frameworks in major jurisdictions will become clearer, giving institutions the confidence to move from pilot projects to full-scale integration. Custodians will expand their digital-native service capabilities, supporting smart contract operations and strengthening asset recovery mechanisms.