Wall Street’s Tokenisation Boom Runs Into Infrastructure Challenges

Crypto firms and major financial institutions are rapidly expanding efforts to bring traditional securities onto blockchain networks, arguing the technology could reshape capital markets through faster settlement, continuous trading and improved collateral efficiency. 

Supporters say tokenisation may also reduce reliance on ageing back-office infrastructure while giving issuers better insight into shareholder activity.

The sector’s growth has accelerated sharply over the past year. Tokenised real-world assets recently exceeded US$32 billion (AU$44.48 billion) in market value, while blockchain-based US Treasury products have climbed above US$15 billion (AU$20.85 billion). 

Asset managers including BlackRock and Janus Henderson are also backing new liquidity infrastructure aimed at improving redemption speed for tokenised funds.

Related: Australia’s Proposed Tax Overhaul Could Increase Tax on Long-Term Crypto Holdings 

Tokenised Equities Are Facing Increased Scrutiny 

However, executives across the industry say many products still fail to deliver genuine blockchain-native functionality. Bullish CEO Tom Farley said much of today’s tokenised equity market consists of synthetic products linked to traditional shares rather than legally recognised securities issued directly onto blockchain-based shareholder records. 

Bullish’s acquisition of Equiniti for US$4.2 billion (AU$5.84 billion) was designed to address that issue by integrating transfer-agent infrastructure into tokenised markets.

Liquidity remains another major concern. Chris Kim, founder of Axis, argued that issuing tokenised assets has advanced faster than the market’s ability to support efficient trading. Analysts also warned that the same assets are often issued across multiple blockchains in incompatible formats, contributing to fragmented liquidity pools and pricing inefficiencies. RWA.io estimated these inefficiencies currently cost the market between US$600 million (AU$834 million) and US$1.3 billion (AU$1.81 billion) each year.

Although financial firms continue investing heavily in blockchain settlement systems, industry participants say significant infrastructure and interoperability challenges still need resolving before tokenised securities can operate at scale.

Related: Ethereum Pushes Clear Signing to Combat Costly Crypto Scams

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