Tokenisation and Financial System Optimization

"At the heart of this vision [of the next-generation #monetary_and_financial_system] is the concept of #tokenisation, the process of recording claims on real or financial assets that exist on a traditional ledger onto a #programmable_platform.   #Tokenisation represents the next logical progression in the evolution of the monetary and financial system, as it enables the integration of #messaging, #reconciliation and #asset_transfer into a single, seamless operation.   Its potential lies in its ability to knit together operations encompassing money and other assets that would reside on the same programmable platform.   This could be made possible by a new type of financial market infrastructure – a "#unified_ledger" – which may or may not use #distributed_ledger_technology (DLT). By bringing together tokenised #central_bank_reserves, #commercial_bank_money and financial assets into the same venue, a unified ledger can harness tokenisation's full benefits.   Tokenisation is poised to both improve the old, by overcoming the frictions and inefficiencies of the current architecture, and enable the new, by opening up new #contracting possibilities. In #cross_border_payments, tokenisation could replace the #complex_chain_of_intermediaries and the sequential updating of accounts in today's correspondent banking transactions with a #single_integrated_process.   Together with state-of-the-art #compliance_tools made available on the platform, tokenisation would thereby reduce #operational_risks, delays and costs. Similarly, it would enhance capital markets by enabling the contingent execution of actions in terms of #collateral_management, margining adjustments and delivery-versus-payment arrangements."   — From: #BIS (Bank for International Settlements), The Next-Generation Monetary and Financial System (Chapter III), Annual Economic Report 2025, June 24, 2025   The full document is here: https://lnkd.in/eJZXBY9R

This is big news. Tokenization is fast becoming the next battleground for financial infrastructure. Goldman Sachs and BNY Mellon just made one of the boldest moves yet. Tokenization transforms real-world assets into digital tokens - unique, programmable representations of value that can be transferred, tracked, and embedded into automated financial workflows. Goldman Sachs and BNY Mellon are turning traditional money-market funds (MMF) into digital tokens. These funds - a $7.1 trillion global market managed by firms like BlackRock, Fidelity, and Federated Hermes - are commonly used by companies and asset managers to hold short-term cash in safe, interest-earning instruments like Treasury bills and commercial paper. But behind the scenes, they still run on decades-old infrastructure, full of manual steps, cut-off times, and delayed settlements. Tokenization changes that. 𝗛𝗼𝘄? By bringing the same speed, transparency, and automation we expect from modern payments and applying it to financial instruments that haven’t evolved in decades. ·      Instant settlement: Instead of waiting hours (or days) for trades to clear, tokenized assets can settle almost instantly - 24/7, without cut-off times. ·      Programmability: Rules and logic (e.g., eligibility checks, compliance constraints) can be embedded directly into the token - reducing manual oversight. ·      Fractional ownership: Investors can hold smaller, more flexible portions of a fund, which is hard to do in traditional structures. ·      Real-time tracking: Every transfer or ownership change is recorded transparently on a blockchain, improving auditability and risk management. ·      Easier collateralization: Tokenized fund shares can be pledged as collateral or moved between counterparties far more efficiently - a big advantage in treasury and liquidity management. 𝗛𝗼𝘄 𝘁𝗵𝗲 𝗽𝗮𝗿𝘁𝗻𝗲𝗿𝘀𝗵𝗶𝗽 𝘄𝗶𝗹𝗹 𝘄𝗼𝗿𝗸: ·      BNY Mellon will distribute tokenized money-market funds to institutional clients via LiquidityDirect - its cash management platform that helps treasurers and asset managers invest short-term liquidity. ·      Goldman Sachs will record and track ownership of the fund tokens on its private blockchain, providing speed, traceability, and operational efficiency. ·      The offering will support tokenized versions of funds managed by major players like BlackRock, Fidelity, and Federated Hermes. 𝗪𝗵𝘆 𝗻𝗼𝘄? The new U.S. Genius Act gives legal clarity for stablecoins and tokenized assets -removing regulatory uncertainty and unlocking tokenization across mainstream finance. 𝗪𝗵𝗮𝘁’𝘀 𝗻𝗲𝘅𝘁? This could reshape expectations around liquidity, treasury operations, and how financial assets are managed and settled. Custodians and asset managers will need to adapt. Tokenized Treasuries, equities, and real estate are already being tested. Opinions: my own, Graphic source: CNBC 𝐒𝐮𝐛𝐬𝐜𝐫𝐢𝐛𝐞 𝐭𝐨 𝐦𝐲 𝐧𝐞𝐰𝐬𝐥𝐞𝐭𝐭𝐞𝐫: https://lnkd.in/dkqhnxdg

Financial Conduct Authority - Progressing Fund Tokenisation 1️⃣ The UK’s Next Big Move in Finance - The FCA has launched CP25/28 – Progressing Fund Tokenisation, outlining how authorised funds can move on-chain using distributed ledger technology (DLT). The UK aims to become a global hub for tokenised asset management. 2️⃣ Efficiency Through Direct Fund Dealing - A new “Direct to Fund” (D2F) model will allow investors to deal directly with funds rather than intermediaries — improving efficiency, cutting costs, and aligning the UK with Ireland’s fund models. 3️⃣ Tokenised Money Market Funds (tMMFs) - The FCA supports using tokenised MMFs as collateral for derivatives — citing pilot projects like Aberdeen Investments, Archax, and Lloyds Bank — enabling faster, transparent, and programmable collateral management. 4️⃣ Pathway to Stablecoin Settlement - The paper explores using qualifying stablecoins (as defined in the upcoming UK regime) to settle fund transactions, laying groundwork for fully on-chain fund operations supported by the Digital Securities Sandbox. 5️⃣ Global Coordination & Project Guardian - The FCA is collaborating internationally with the Monetary Authority of Singapore (MAS) and IOSCO through Project Guardian to harmonise tokenisation standards and cross-border fund interoperability. Real-Life Example - Aberdeen Investments, Archax, and Lloyds Banking Group recently completed the UK’s first live pilot using tokenised MMF units and UK gilts as collateral for FX trades — a clear signal of how regulated institutions can adopt blockchain for operational efficiency. Why It Matters - This marks the institutionalisation of tokenisation. By embedding DLT in the UK’s £14.3 trillion asset management industry, the FCA is unlocking $135 billion in potential savings through faster settlement, lower reconciliation costs, and greater transparency. - It also signals the regulator’s confidence that blockchain can coexist with robust investor protection and regulatory oversight. What Happens Next Expect: - The UK’s first fully tokenised authorised funds in 2026. - Expansion of the Digital Securities Sandbox for on-chain settlement. - Integration of qualifying stablecoins for fund unit transactions. - Wider industry pilots connecting tokenised MMFs, stablecoins, and DLT-based fund registers.

My recent article on : The Business of Liquidity: Stablecoins, Tokenized MMFs, and the Velocity of Finance The thesis I’ve been exploring sits at the intersection of monetary policy, technology, and the business models that support or disrupt financial structures. Do tokenized assets—like tokenized T-bills, money market funds (MMFs), or stablecoins—actually create new liquidity, as many RWA and token projects claim through promises of fractionalization and accessibility? Or is this simply a shift in modality—one that enables liquidity expansion through programmability, composability, and greater market access? My inference from my research, Tokenization doesn’t reinvent liquidity — it redeploys it with greater precision and velocity. Tokenized MMFs and T-bills improve capital efficiency by collapsing traditional settlement layers and enabling intraday recycling. Liquidity savings translate into liquidity provisioning, where assets are no longer dormant between transactions but remain active, pledged, or mobilized. For market makers, treasurers, and on-chain fund operators, this is a paradigm shift: one where yield-bearing instruments can double as collateral, and where programmable liquidity changes how institutions think about cash. #TokenizedFinance #Stablecoins #LiquidityProvisioning #DigitalAssets #ProgrammableLiquidity #MarketStructure #Tokenization #OnChainFinance #AssetTokenization #CapitalEfficiency #TokenizedMMF #RealWorldAssets #FintechInnovation #InstitutionalDeFi #FinancialInfrastructure #CollateralMobility #ModernMarkets #DeFiEvolution #StablecoinAdoption #ProgrammableMoney

Asset tokenization is transforming global financial markets by converting real-world assets—such as real estate, bonds, equities, and intellectual property—into digital tokens using blockchain or distributed ledger technology (DLT). This enables fractional ownership, improved liquidity, automated compliance, and cost-efficient settlement through smart contracts. By 2030, tokenized assets could represent USD 16 trillion, about 10% of global GDP, with the fastest growth expected in real estate, art, and financial instruments. Projects like MAS-led Project Guardian and Global Layer One (GL1) are pioneering tokenization of bonds, FX, and funds with major banks such as DBS, Citi, and HSBC. Key benefits include: Programmability and composability for customized financial products Real-time transparency and improved user experience Lower transaction costs and reduced intermediation However, challenges persist: Regulatory ambiguity and fragmentation Lack of interoperability across blockchains Inconsistent classification and legal recognition of tokenized assets Investor protection and education gaps International regulators (IOSCO, BIS, IMF) are working to address these through global standards and sandbox frameworks. With growing institutional adoption and technological maturity, tokenization is moving from pilot to scale, heralding a more inclusive, efficient, and transparent financial future. - Source Global Finance & Technology Network