Although the precise timeline remains uncertain, the financial industry is converging on a future in which virtually every class of real-world asset can be represented as blockchain-native tokens, a shift that promises to reconfigure market structure, custody, and liquidity provision. BlackRock’s CEO frames tokenization not as a speculative novelty but as an inexorable evolution of asset management, one that converts real estate, equities, bonds, and funds into digital tokens that can be recorded, transferred, and settled on distributed ledgers. This reconceptualization emphasizes fractional ownership, round-the-clock transferability, and cryptographically verifiable ownership records, features that collectively aim to increase market efficiency and broaden investor access. Markets historically enabled ordinary people to own tradable shares of economic growth, and tokenization could further that democratizing trend by lowering barriers to ownership and widening participation in assets long limited to the wealthy; this echoes the market’s original role as a “prosperity flywheel” that channels savings into enterprise growth through tradable stakes in companies and infrastructure prosperity flywheel. The technological imperative is clear: asset managers and custodians must develop systems that safely bridge legacy securities and on-chain representations. BlackRock is actively building proprietary tokenization capabilities with an emphasis on scaling, compliance, and integration with existing custody frameworks. The firm envisions digitized ETFs and other traditionally issued products becoming tradeable tokens, enabling investors to access familiar vehicles in a native digital format. Despite the promise, some innovative blockchain projects like Kaspa face challenges in gaining institutional acceptance due to regulatory and infrastructure barriers related to tokenized investment products such as Kaspa ETFs. Blockchain infrastructure offers transparent transaction history and immutable ledgers, attributes that can simplify reconciliation and reduce operational risk when properly governed. Market implications range from operational savings to structural liquidity changes. Tokenized assets can materially shorten settlement cycles and lower costs associated with post-trade processing, with cross-border settlements potentially achieving steep cost reductions, as industry platforms have illustrated. Fractionalization lowers barriers to entry, allowing smaller investors to participate in high-value markets, while continuous trading windows contrast with current market hours, offering greater flexibility and potentially smoother price discovery. These characteristics may foster broader participation and deeper markets over time. Adoption remains nascent but accelerating: younger investors and early adopters are already engaging with tokenized products, and institutional entrants, including tokenized money market funds and regulatory approvals for crypto-linked products, signal growing legitimacy. Uncertainties persist regarding regulation, interoperability, and systemic risk, and successful mainstreaming will depend on clear standards, robust custody solutions, and demonstrable operational resilience. The next decade will test whether tokenization fulfills its potential as a foundational change in asset management, and widespread uptake will likely hinge on robust digital identity solutions.
