By David Stevenson and Damien Black
The tokenisation of real-world assets is accelerating rapidly. Essentially, it represents a new form of securitisation that enables asset managers and owners to fractionalise real-world assets. Its origins lie in the enthusiastic world of cryptocurrencies, but the technology behind it is now appealing to mainstream, traditional finance (tradfi) players.
For most of the last decade, digital tokens have been the preserve of a select band of ever-so-slightly evangelical crypto bro types, filled to the brim with talk of Ethereum, smart contracts and blockchains. In sum, the perpetual ‘next big thing’.
But token’s time, especially for real-world assets like ETFs, private credit and property, might just have come. And as many major asset management firms adopt this new disruptive technology, a realisation is dawning on finance professionals: tokens can be seen as just another form of securitisation, a new, technologically enabled wrapper. Tokens are just the latest iteration of a process of dividing up real-world financial assets, be they ETFs or Treasury bonds, into units that can be traded effortlessly, in real time and with almost no friction.
So, what are tokens? In incredibly simple terms, a real-world asset is fractionalised and then represented as digital tokens on a blockchain - so instead of one person owning the whole asset worth £10m, you might create 10,000 tokens each worth £1,000. Investors buy those tokens, and the blockchain automatically records who owns what.
At the core is a smart contract - a piece of self-executing code living on a blockchain such as Ethereum. When the asset gets tokenised, that smart contract is deployed to the chain and programmed with all the rules: how many tokens exist, who can hold them, what rights they carry. Each token is essentially a cryptographic certificate of ownership, unique and tamper-proof. When someone buys or sells a token, the smart contract updates the ledger automatically, no middleman required. The blockchain itself is just a shared database replicated across thousands of computers simultaneously, so no single party controls it and no record can be quietly altered.
Tokens represent a “major digital transformation” in the world of finance, following in the footsteps of fintech and ETFs. We’ll explain more about blockchain in a bit, but for now, you should bear these two key ideas in mind, because they are central to the whole concept: in the tokenisation world, blockchain platforms in effect replace the stock market, while digital wallets replace conventional brokerage accounts.
A wallet, whether stored offline on a physical device or online as a digital account, stores your private key. This is essentially a coded password that proves your ownership of the tokenised asset. Keeping your digital wallet and key safe is essential – unlike a regular password, it cannot be changed once issued. Keeping a copy somewhere safe would be prudent.
Blockchain is a series of interlinked digital “blocks”, each of which stores data – for our purposes, records of financial transactions. This provides transparency and accountability – once entered on a blockchain, a unit of data cannot be altered or tampered with. The arrangement of blocks is sequential and chronological, providing a public record of transactions accessible to anyone with access to the blockchain.
There is a debate currently raging about whether or not “permissioned” blockchains disrupt the ethos of the original concept – decentralised finance (DeFi) was envisaged as a peer-to-peer affair, where anyone could access blockchain’s transparency. However, as big players like BlackRock have moved into the game, blockchain is increasingly becoming “permissioned” – that is, TradFi institutions are willing to put their assets into the technology, but only if access is restricted to approved stakeholders.
Once fully implemented, blockchain technology should enable transactions to be resolved more quickly than ever before. True, the T+0 envisaged by advocates might be some way away – but industry experts argue that blockchain tokens will eventually enable “instant international transactions”. This is because, as tokenisation advocate and investment portfolio manager Nick Mersh points out, traditional capital markets still rely on multiple middlemen – a time- and cost-consuming friction that blockchain-based tokenisation should, in theory, obviate.
“Brokers, custodians, and clearing houses still need a lot of reconciliation workflow [which leads to] delayed settlement in terms of the individual transactions, and what tokenization really introduces is a different architecture,” Mersh told TheIntersection.
Sounds too good to be true. In that case, why did BlackRock just put $2.2 billion in digital assets on Uniswap’s blockchain rails? Or how about banking veteran HSBC, which launched its Orion platform to facilitate tokenized deposits in 2025? HSBC Orion’s services have been solicited by the UK Treasury, which aims to be a G7 leader in the use of blockchain technology, and the Hong Kong Monetary Authority to help it issue HK$10 billion in digital green bonds.
In the latter case, “the option to settle via tokenized central bank money” was pivotal to the offering. Or what about European asset giant Amundi? Noted for its cautious and conservative outlook, it launched tokenized shares in its $6.5 billion money market fund in November. By the end of the decade, Amundi predicts tokenized funds could total anywhere between $30 billion AUM and ten times that.
Whatever your misgivings, it’s hard to ignore the fact that big players are putting their money where their mouths are when it comes to tokenization. That said, predictions about how much tokens will be worth vary wildly. McKinsey goes further than Amundi – its conservative estimate of tokenized fund AUM by 2030 is $300 billion, which is what Amundi’s blue skies look like. McKinsey’s blue-sky estimate for tokenised AUM by the end of the decade looks like a possibly overenthusiastic $1.2 trillion. Then you have outliers like the aforementioned Mersh, who thinks the total value of blockchain-based assets will be much higher – try five to ten trillion on for size.
More conservative investors might be forgiven for reading this and wondering if they are looking at a 21st-century gold rush. Wait, did somebody mention gold? According to an article released by CoinMarketCap in March, tokenised gold and commodities are already worth some $6.5 billion. Meanwhile, HSBC Orion claims its Gold Token trading volumes passed the $1 billion mark since launching in 2024. The Business Research Company estimates that tokenised global assets were worth around $1.4 trillion in 2025. It forecasts an aggregated CAGR of around 40% to 2030 – which would put the total of tokenized assets north of $7 trillion. Suddenly, Mersh’s wild predictions don’t seem so wild any more.
The giant’s scramble
All that said, you might simply conclude that tokenization isn’t for you and stop shy of investing. That’s fair enough. But like it or not, permissioned blockchain technology – itself a far cry from the original permissionless model envisaged by early evangelists – is looking set to become the new normal among institutional investors. Aside from BlackRock, Amundi and HSBC, asset managers JP Morgan, Hamilton Lane and Franklin Templeton are all riding the blockchain railway. Banking giants BNY Mellon and Goldman Sachs are collaborating in the space, while Lloyds recently experimented with blockchain platform Canton. These players are far from alone – Citi, State Street, Deutsche Bank and Schroders are just some of the other institutions that are getting involved in tokens.
That in itself makes the phenomenon worth paying attention to. True, many unanswered questions remain over regulation – another debate raging is whether tokenized assets require a whole new set of bespoke legislation, or the existing rules governing transactions can and should be applied.
But necessity is the mother of invention, as they say – with the US Congress leading the charge, expect these legal wranglings to be ironed out. Given the kind of money being put into tokens, institutions simply cannot afford to leave this problem unsolved.
As you might expect, ETF issuers in particular are showing real enthusiasm for tokens. Quite apart from BlackRock’s own adventures in this space, US-based ETF firm Wisdom Tree has launched round-the-clock trading and instant settlement for its tokenised money market fund WTGXX — a first for a registered US mutual fund.
And where ETF issuers go first, the big institutional market makers follow. Amsterdam-based Flow Traders has been the loudest voice in the room. The firm, which cut its teeth as an ETF market maker back in 2004, has been among the most enthusiastic proponents of the tokenisation opportunity. Its CEO, Thomas Spitz, described tokenisation as the "next ETP moment" on the firm's Q4 results call, drawing an explicit parallel to the early days of exchange-traded products — a market that eventually became enormous for liquidity providers. The firm is explicitly betting that institutional clients will want to trade and hedge exposure overnight and at weekends, not just during regular market hours.
The appeal for market makers, in theory, is straightforward. Volatility and pricing inefficiencies — both abundant in any nascent market — create arbitrage opportunities. Wide bid-ask spreads mean healthy margins per trade. The early days of crypto trading were famously lucrative for this exact reason: exchanges were mispriced relative to each other, competition was thin, and market makers with the right infrastructure could clean up. Tokenised assets could, in theory, replay that dynamic. Roger Bayston, head of digital assets at Franklin Templeton, called it a "massive opportunity," citing market volatility and the potential for lucrative business if uptake and fungibility across the space are sufficient.
A cynical view?
It might well transpire that tokenization is nothing like the peer-to-peer utopia the early believers imagined. In a recent opinion article for the Intersection, investment commentator John Jameson suggests that DeFi is nothing more than a smokescreen to conceal the concentration of assets in fewer hands. “In an act of pure irony, the more decentralised society becomes, the more it will be controlled,” he argues. Indeed, with big institutions like BlackRock and Amundi muscling in on the tokenization space, this gloomy prediction already appears to be coming true.
But until that process unfolds, there are two very real-world scenarios at play, both pointing to a real opportunity for existing institutional and advisory players. The first is that a huge amount of wealth has been created in the crypto world, and much of that wealth is now seeking a home outside of cryptocurrencies. There are probably thousands, maybe tens of thousands, of digital whales sitting on millions in their digital wallets, desperately looking to diversify into anything that isn’t a crypto currency. Being cynical, if you can sell a digital Treasury token to these crypto enthusiasts, why not?
And then there’s the shiny frontier of frictionless transaction flow for the rest of us. If you can’t buy a US ETF because you are a UK-regulated customer, why not buy a token that represents that US ETF (on Robinhood)? If you can’t easily access a private credit fund, why not tokenise it for wealthier investors? If you can work out how to deal with liquidity, then everything else is managed by technology, which should be effortless and low-cost.
What could possibly go wrong?
This article first appeared in late March in Citywire.co.uk as part of their digital assets explainers.
