$8.3B real world assets now on-chain: Can tokenization make banks top crypto custodians?

Wall Street’s greatest steadiness sheets are quietly rebuilding the crypto stack beneath the banner of tokenization and custody.

What started as a defensive stance towards digital assets is popping into an infrastructure shift: bringing fund administration, money administration, and settlement onto blockchain rails that look extra like BNY Mellon’s LiquidityDirect platform than a typical crypto trade.

Since late summer season, Goldman Sachs and BNY Mellon have taken tokenized cash market funds live, Citi has positioned itself as a tokenization agent and custodian on Switzerland’s SDX trade, and BlackRock has doubled down on the thesis that tokenized funds will ultimately sit beside ETFs as a core product line.

In the span of some months, tokenized treasuries have grow to be an $8.3 billion asset class. Broader real-world assets (RWAs) now vary between $24 and $30 billion. Yet the real contest isn’t within the numbers; it’s in who will custody the subsequent $100 billion of digital paper and the way these assets connect with conventional steadiness sheets.

The first wave of financial institution entries reveals a transparent sample. Goldman and BNY chose the least risky and most systemically related asset they may: cash market funds.

Money market funds are among the many most secure and most liquid funding autos in conventional finance. They maintain short-term authorities and company debt, giving establishments a strategy to park money whereas incomes modest yields with minimal threat. Tokenizing them turns these holdings into digital items that may be transferred immediately and settled 24 hours a day.

For massive establishments, the profit will not be speculative however operational: company treasurers can transfer money quicker, pledge assets as collateral, and scale back the frictions that include banking cut-off occasions.

Citi’s technique strikes in parallel via personal markets. By becoming a member of SDX, Citi now provides custody and tokenization providers for regulated digital securities, appearing because the back-end for issuers experimenting with tokenized bonds or shares.

The construction resembles conventional custody, however settlement occurs atomically, that means cost and asset switch happen concurrently with out intermediaries.

BlackRock’s BUIDL fund demonstrates how this could scale. The fund holds tokenized Treasury payments and represents them as programmable tokens. Its assets have grown more than eightfold in 18 months. With whole assets at $13.5 trillion and practically $100 billion of crypto-linked funds, BlackRock has the attain to show tokenized merchandise into commonplace portfolio elements for establishments.

The quiet competitors for custody charges

If the early 2020s had been about crypto custodians studying compliance, the mid-2020s are about banks studying blockchain. The gamers are totally different, however the economics are acquainted. Coinbase, Fidelity, and BNY already cost custody charges of roughly 0.05% to 0.15% of the worth they maintain, relying on shopper measurement and threat profile.

As tokenized money and securities grow to be mainstream, these percentages begin to resemble the charges charged in fund administration and collateral administration, creating an overlap that didn’t exist earlier than.

In this model of tokenization, the attraction will not be headline innovation however effectivity. A tokenized Treasury or fund share can transfer immediately between accounts and settle in real time, slicing prices for each shoppers and custodians. The conservative outlook for this market sees tokenized Treasuries hovering between $6 billion and $8 billion if regulation slows and yields fall.

A middle-ground projection expects round $10-15 billion by mid-2026 as extra banks combine money-market merchandise. The optimistic state of affairs reaches $25-40 billion if tokenized money accounts tied to ETFs take off and if banks begin testing repo markets for tokenized collateral.

Repos are the spine of short-term lending in finance. Banks lend money in trade for protected collateral reminiscent of Treasuries, agreeing to reverse the commerce later. Tokenized repos would enable these transactions to settle mechanically on a blockchain, lowering the operational delays and counterparty threat that at the moment require costly intermediaries.

That collateral hyperlink is what turns tokenization from a bookkeeping experiment into real monetary plumbing. Goldman and BNY’s tokenized money-market shares already transfer inside closed, permissioned environments.

The subsequent query is whether or not these tokens can transfer throughout custodians safely. The joint Project Guardian initiative between the UK’s Financial Conduct Authority and Singapore’s Monetary Authority is testing that precise thought: shared requirements for verifying compliance throughout private and non-private blockchains.

If the mission succeeds, 2026 may convey the primary bank-to-bank repo transactions executed solely with tokenized assets.

Today’s methods nonetheless function inside walled gardens. Networks reminiscent of Goldman’s GS DAP, SDX, and JPMorgan’s Onyx provide effectivity at the price of interoperability. Regulators want this mannequin as a result of each participant is thought and verified, however monetary establishments are starting to discover how permissioned methods may connect with public networks via cryptographic proofs that protect compliance.

If that hyperlink is established, custody charges may broaden towards $300–600 million in annual income, assuming tokenized money and Treasury merchandise attain $25–40 billion in assets and cost service charges close to 0.1–0.15%.

Policy will resolve who will get to carry the keys

Regulation will resolve how briskly this occurs. In Europe, MiCA has introduced uniform guidelines for custodians and crypto-asset service suppliers, often called CASPs. These guidelines outline how digital assets should be segregated, safeguarded, and reported, permitting banks to passport tokenized funds throughout the European Economic Area with out going through totally different nationwide necessities.

The UK and Singapore are constructing related frameworks via Project Guardian to standardize tokenization in asset and wealth administration.

In the US, the impediment is accounting remedy. Under the now-revised Staff Accounting Bulletin 121, or SAB 121, banks holding crypto for shoppers needed to report these assets on their steadiness sheets as liabilities. That made large-scale custody uneconomical for systemically vital banks, often known as G-SIBs. If future steering removes that burden, these banks may maintain tokenized assets with out incurring punitive capital necessities, unlocking the complete balance-sheet potential of tokenization.

Until then, the corporations already embedded in ETF custody, Coinbase, Fidelity, and BNY, retain a sensible benefit. Coinbase’s $246 billion in assets under custody reveals how a lot circulation nonetheless runs via crypto-native infrastructure. Yet the gravitational pull of regulated fund buildings is growing. As tokenized Treasuries and money-market merchandise scale, the operational logic of banking begins to merge with blockchain’s settlement mechanics.

Money-market tokens might sound like plumbing, however plumbing determines who controls the circulation of funds. In this race, the circulation isn’t just digital assets however the future construction of the steadiness sheet itself.

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