The recent approval of spot Bitcoin ETFs, particularly by asset management giant BlackRock, has captured significant market attention. While much has been written about this development, it points to a broader trend: the accelerating tokenization of real-world assets (RWA) by traditional financial institutions.
This movement goes far beyond cryptocurrencies. Major banks and financial service providers are actively developing and deploying solutions to bring traditional assets, like money market funds and commercial bank deposits, onto the blockchain. This process of asset tokenization is poised to unlock trillions of dollars in value, potentially creating a new paradigm for global finance.
Major Financial Institutions Are Embracing Deposit Tokens
The race to tokenize assets is not a future concept; it's happening now inside the world's most established banks.
J.P. Morgan: The First-Mover in Institutional On-Chain Services
J.P. Morgan (often referred to as "Big Mo") began its internal blockchain experiments as early as 2015. This led to the creation of Onyx, a robust asset management platform that has reportedly processed approximately one trillion dollars in transaction volume, with clients including other banking giants like Goldman Sachs.
A cornerstone of their strategy is the JPM Coin, a deposit token built on the bank's own deposit base. This model is widely seen as a blueprint other major banks are likely to follow. While regulatory nuances have delayed its full public launch, the intent is clear. The bank further solidified its commitment by applying for a "J.P. Morgan Wallet" trademark, positioning itself as a leader in traditional finance's digital transformation.
Citi Group: Catching Up with Integrated Token Services
Not to be outdone, Citi Group launched its own digital assets platform in September. This service allows institutional clients to convert their traditional deposits into digital tokens—essentially creating their own version of deposit tokens.
Similar to J.P. Morgan's offering, Citi's initial focus is on internal and institutional clients, targeting pain points in cross-border payments and automating complex trade finance workflows. Their approach is notably practical; they partnered with international shipping conglomerate Maersk to solve the specific problem of paying canal tolls. This process, which traditionally involves slow international bank transfers and costly instruments like letters of credit, can be streamlined dramatically with tokenization, saving both time and money.
UBS: Pioneering the Tokenized Money Market Fund
In a key development this October, UBS Asset Management launched a pilot project for a tokenized money market fund on the Ethereum blockchain.
For many, the concept of a money market fund is familiar—it's the same type of product that underpinned the wildly successful Yu'ebao fund in China. UBS's initiative, developed through its official digital asset platform under Singapore's regulatory framework, represents a significant step. A tokenized share in a money market fund is, for all practical purposes, functionally equivalent to a digitized, yield-bearing deposit token.
The Collective Push: Deposit Tokens as a De Facto CBDC
There is a growing consensus among these institutions: if central bank digital currencies (CBDCs) are slow to materialize, then bank-issued deposit tokens could effectively serve a similar purpose. In the current system, most commercial money exists as digital entries on private bank ledgers, not as central bank money (M1).
J.P. Morgan's analysis suggests that the key benefits touted for CBDCs—such as reduced settlement times and fees, and lower counterparty risk—can be equally achieved through a network of regulated deposit tokens.
The proposed flow for a transaction using these tokens would involve several steps, with a key recognition: a major piece of the puzzle is still missing. Currently, most bank-issued deposit tokens are siloed within their own proprietary networks. For true interoperability and seamless settlement between different banks' tokens, broader industry cooperation and new infrastructure are required.
The Undercurrent of Settlement Solutions
The need for a universal settlement layer has not gone unnoticed. Major players are proposing competing solutions to connect these emerging tokenized networks.
The Federal Reserve: Proposing a Regulated Network
In a significant move this past July, the Federal Reserve Bank of New York's innovation wing introduced a conceptual framework for a Regulated Liability Network (RLN). This proposed system aims to enable the real-time, cross-border settlement of various digital assets within the U.S. regulatory perimeter.
The Fed's involvement naturally attracted a consortium of heavyweight supporters, including SWIFT, Bank of New York Mellon, Citi, HSBC, Mastercard, and several other major U.S. banks.
SWIFT: Adapting to Remain the Messaging Backbone
The Society for Worldwide Interbank Financial Telecommunication (SWIFT), the longstanding backbone of international bank messaging, is acutely aware of the disruptive potential of blockchain. Rather than being replaced, SWIFT is proactively adapting.
In late August, SWIFT launched a new project demonstrating how it could evolve to become a critical interoperability node for transferring tokenized assets between banks. In this initiative, SWIFT brought together another powerful group of partners, including ANZ, BNP Paribas, Clearstream, Euroclear, and The Depository Trust & Clearing Corporation (DTCC).
A key technical aspect of SWIFT's proposed solution involves banks maintaining their own private blockchains for original asset tokenization. To bridge these isolated networks, the proposal utilizes Chainlink's Cross-Chain Interoperability Protocol (CCIP) to create an enterprise abstraction layer, enabling the cross-chain transfer of assets onto a public testnet like Ethereum's Sepolia. This collaboration highlights how legacy financial infrastructure and decentralized oracle networks could converge.
👉 Explore advanced interoperability solutions
Traditional Exchanges: Progress Amid Caution
While banks charge ahead, traditional stock exchanges are moving more cautiously, navigating a landscape of regulatory uncertainty.
Nasdaq: Hitting Pause on Custody Plans
In a surprising move, Nasdaq announced in July that it was halting the launch of its own digital asset custody solution. This project, initially proposed in 2018, was officially paused due to "uncertainty in the regulatory landscape." This decision came just as a wave of spot Bitcoin ETF applicants, including BlackRock, chose to partner with specialized crypto custodians like Coinbase. Some analysts speculate Nasdaq's pause may also be an effort to avoid any perceived conflicts of interest, especially since many of these ETFs are slated to list on its exchange.
London Stock Exchange (LSE): In a Deliberate Planning Phase
The London Stock Exchange Group has also expressed its ambition to develop a new digital markets business. This venture would be a separate entity, built on blockchain technology to facilitate the trading of tokenized assets. Current reports indicate the LSE is still in deep consultation with UK regulators and government bodies, suggesting a launch is not imminent.
Hong Kong Exchanges (HKEX): Closely Following Suit
Hong Kong has positioned itself as a more proactive jurisdiction regarding digital assets. As far back as late 2022, it approved the listing of cryptocurrency futures ETFs. For example, CSOP Asset Management launched ETFs tracking Bitcoin and Ethereum futures. However, these products are still ultimately based on futures contracts traded on the U.S.-based CME Group. With the U.S. now approving spot crypto ETFs, market observers widely expect Hong Kong to quickly follow suit with similar products.
Frequently Asked Questions
What is asset tokenization?
Asset tokenization is the process of converting rights to a real-world asset (like real estate, company shares, or a fund's shares) into a digital token on a blockchain. These tokens can then be traded, stored, and managed with the efficiency and transparency of blockchain technology.
What is a deposit token?
A deposit token is a digital representation of a commercial bank deposit issued on a blockchain. It is a liability of the issuing bank, fully backed by deposits held at that bank. It is designed for fast, secure transfers and settlements between institutional clients, often for cross-border payments and trade finance.
How is a CBDC different from a bank-issued deposit token?
A Central Bank Digital Currency (CBDC) is a digital form of a country's fiat currency, issued and backed directly by the central bank. It is a direct liability of the central bank. A bank-issued deposit token is a digital liability of a commercial bank, backed by that bank's deposits. While they can serve similar purposes, CBDCs carry the full faith and credit of a sovereign state.
What are the main benefits of tokenizing assets?
The primary benefits include increased liquidity for traditionally illiquid assets, 24/7 market operation, fractional ownership (allowing investment in smaller portions), reduced settlement times from days to minutes, lower costs by cutting out intermediaries, and enhanced transparency and auditability.
Is asset tokenization the same as cryptocurrency?
No, they are related but distinct concepts. Cryptocurrencies like Bitcoin are native digital assets on their own blockchains. Asset tokenization involves creating a digital representation of an existing traditional asset on a blockchain. Tokenized assets are often subject to the same regulations as their physical counterparts.
What is holding back the widespread adoption of tokenization?
The main challenges are regulatory clarity, technological standardization across different platforms, establishing legal frameworks that recognize digital tokens as proof of ownership, and building the necessary infrastructure for secure and interoperable trading and custody.
Will Asset Tokenization Fuel the Next Bull Market?
The institutions driving this change—J.P. Morgan, Citi, UBS, the Fed, and SWIFT—are not speculative startups. They are the bedrock of the global financial system, and their participation underscores the profound legitimacy and potential of asset tokenization.
In finance, virtually any asset can be tokenized. However, the current trajectory suggests that the tokenization of monetary instruments like bank deposits and money market funds is the closest to achieving mainstream, large-scale adoption. Regulators currently have limited effective arguments to halt this logically sound and efficiency-driven process.
Sentiment in key legislative bodies is also shifting positively. The supportive reaction from the U.S. House Financial Services Committee to PayPal's stable币 launch is a telling example. As regulatory green lights, like the one anticipated for J.P. Morgan's deposit token, become more common, the volume of assets moving on-chain could grow exponentially. This influx of institutional capital and traditional assets onto blockchain infrastructure possesses all the ingredients to catalyze the next major wave of growth in the digital asset space.