Banks’ drive to ‘tokenise’ assets moves slower than expected

AMSTERDAM - Banks which for years have talked about creating “tokenised” versions of assets like bonds and currencies say a shift to blockchain-based trading is taking longer than expected, with some investors cautious about the idea.

By creating tokenised assets –

usually blockchain-based tokens to represent holdings of mainstream assets

such as currencies or bonds – banks hope to make it more efficient, faster and cheaper to trade, and easier to record who owns what.

Consultants and digital asset executives predict that a significant proportion of the world’s assets will be tokenised via blockchain – HSBC and Northern Trust said in a note in 2023 they expected 5 per cent to 10 per cent of all assets by 2030.

But executives speaking at the Money20/20 fintech conference in Amsterdam this week said

the shift to digital versions of assets

was moving slowly.

“It’s taken longer than I expected, to be honest, to get to the point where we are in this space,” said Ms Ryan Rugg, head of digital assets for Citibank’s trade and treasury solutions business.

“We’ve experimented with money markets and bonds but nothing that’s live and scaling right now, the only application that we have live is a tokenised deposit.”

Despite this, Ms Rugg said she remained enthusiastic about tokenisation with the aim to create a tokenised deposit that can be sent 24/7, 365 days a year, avoiding cut-offs in different timezones or for banking holidays.

Clients are requesting it and the token has been live since last year, she added.

While there have been various experimental projects, for example, to create blockchain-based bonds – tokenised trading lacks a liquid secondary market.

Having spent seven years attempting to rebuild its software platform around blockchain, Australia’s stock exchange eventually “paused” the project and announced in 2023 the upgrade would no longer involve the technology.

US crypto firm Ripple president Monica Long said that many US banks have “put digital asset services a bit on hold”.

Ripple in 2023 acquired crypto custody firm Metaco and Ms Long said it was going well – pointing to a recent partnership with HSBC.

One of the main impediments to trading traditional assets via blockchain is that banks are working on their own networks, executives say, making it difficult to trade across platforms.

“Fragmentation slows down adoption, as investors don’t want to connect to dozens of different networks,” said Mr Julien Clausse, head of BNP Paribas’ digital asset platform AssetFoundry ahead of the event.

“More likely than not, we will continue to operate in a hybrid world for years to come, with some domains more actively tokenised because of the perceived benefits and some others remaining in the traditional world,” Mr Clausse said.

REUTERS