Tokenisation boom? Wall Street still isn't biting, JPMorgan says
The market for tokenised real-world assets, long touted as crypto's bridge to mainstream finance, remains small, with a total value of just US$25 billion, according to JPMorgan Chase. And most of that, the bank says, is driven by crypto-native firms rather than Wall Street incumbents.
For all the hype, the total tokenised asset base remains 'rather insignificant', JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a recent note. Key obstacles include fragmented cross-border regulation, legal uncertainty, and limited trust in the enforceability of smart contracts, or blockchain-based computer programs.
'This rather disappointing picture on tokenisation also reflects traditional investors not seeing a need for it thus far,' the team wrote. 'There is also little evidence so far of banks or customers moving from traditional bank deposits to tokenised bank deposits on blockchains.'
Tokenisation, the process of creating blockchain-based representations of real-world assets such as stocks or Treasury bills, has been touted as a way to make financial markets faster, cheaper and more transparent. In theory, tokenised funds could offer near-instant settlement and disintermediate legacy infrastructure. But that vision remains largely theoretical.
Some firms are experimenting. Fidelity Investments filed for an 'on-chain' share class of its Treasury money market fund this year. Exchange-traded fund (ETF) and mutual-fund manager VanEck launched its tokenised VBILL fund with similar exposure to government debt. BlackRock's digital liquidity fund, BUIDL, peaked at US$2.9 billion in assets in May before slipping to US$2.3 billion as at Aug 6, according to tracker rwa.xyz.
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Washington is also paying attention. The US Securities and Exchange Commission recently launched 'Project Crypto', a new initiative under chair Paul Atkins to explore how US markets might adopt blockchain-based settlement.
But so far, real-world adoption remains narrow and shallow. Secondary market activity in tokenised bonds and private assets is minimal. Even the US$15 billion in tokenised private credit cited by JPMorgan is heavily concentrated among a handful of players.
Still, proponents argue that tokenisation is following a slow but inevitable adoption curve, mirroring the early days of the Internet or ETFs. If regulatory clarity improves and infrastructure matures, some say the technology could eventually reshape the plumbing of financial markets.
For now, traditional investors still see limited utility. The existing financial system continues to get faster and more efficient, undermining the need for radical change, while concerns about legal clarity, operational risk, and ecosystem fragmentation persist.
'It remains to be seen how effective regulations would be in addressing institutional investors' hurdles and concerns,' JPMorgan wrote, adding that institutional interest in crypto remains largely confined to Bitcoin exposure. BLOOMBERG
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