For close to half a decade, experts have promised that tokenization of existing assets would transform finance and everyday transactions. Home purchases were meant to close in a day, luxury goods would carry on‑chain provenance certificates to prevent counterfeits, deposits would move as digital tokens, and capital‑markets trades would settle instantly instead of on a T+1 basis. However, the promise has not materialized till now.
The appeal remains powerful. On paper, the value proposition is especially compelling for capital markets. Blockchain technology offers transparency, speed, and disintermediation. Our capital markets are rife with inefficiencies, unnecessary complexity and large number of intermediaries like broker, exchanges, clearing agent settlement, transfer agent, custodian, all adding to the cost of the transaction. In principle, a well‑designed ledger could collapse many of these steps or at least synchronize them.
What feels different?
Mood has shifted. Market participants are dipping their toes as regulations become clear and proof-of-concept pilots gain traction. Firms like Broadridge and J.P. Morgan have successfully tokenized bonds and deposits. In an article that was published in The Economist magazine, even early sceptics like Blackrock are now evangelizing the virtues of tokenization. With maturing of blockchain technology, their clients are gaining comfort with possessing tokens. Friendlier actions by Capitol Hill and the White House are giving regulatory clarity and confidence. For example, the GENIUS act gives legitimacy to stablecoins, a potential payment asset for securities settlement.
Against that backdrop, 2026 is shaping up to be a tipping point for broad use of blockchain technology in the functioning of our capital markets.
Where Blockchain fits best?
The lifecycle functions and instruments that are best suited for blockchain have a few common features. Many parties need to agree on the same data. There is asymmetry in information. Small timing frictions create large capital costs. I have highlighted a few that are ripe to be blockchained.
a. Clearing and settlement of public securities. Most trades in the public markets now settle T+1. During this period, trades are affirmed, confirmed, reconciled, margined, settled, recorded, custodied. Process is prone to failures and inefficient use of capital. With blockchain-based post-trade clearing and settlement, all the above would be “atomic”, aka instantaneous.
b. Private Credit and Private Equity. Fund managers like Apollo and Blackstone are making a big push for retail investors to have access to private funds. However, tradability and price discovery remain a challenge. Blockchain can make private funds more tradable and transparent by putting fund interests and key records on a shared, programmable ledger.
c. OTC trades. Institutional investors continue to use over-the-counter trades to get bespoke exposure. This is a cumbersome and opaque way to trade. Trades are confirmed through messages. Investor is at the mercy of the broker for pricing when it is time to unwind. If
d. Collateral services and Repo trades. High‑volume, collateral‑intensive market where small frictions in settlement, timing, and collateral mobility matter enormously, blockchain directly targets those pain points. Financial institutions like Broadridge and JP Morgan now offer a blockchain-based platform for repo trading. $2bln in daily volume now trade on JPM’s KInexys platform, still small compared to the $4 trillion overall repo market. This new platform has resulted in 50-60% reduction in transaction cost.
Challenges
I see two big hurdles that need to be overcome for an exponential increase in use of blockchain technology in our capital markets.
a. Regulatory clarity. On the surface, current regulatory framework seems conducive to use of blockchain technology. Framework which is based on the principle of “same activity, same risk, same regulatory outcome”, is independent of technology. However, new laws may still be needed. For example, it is not clear if the current definition of “ownership” of a security can be recorded on a distributed ledger. This prevents issuance of tokenized securities that are fully native to blockchain.
b. Interoperability among blockchains. Initiatives so far will result in proliferation of blockchains that competing and non-interoperable. This will lead to fragmentation of the market and reduce liquidity. An obvious solution would be to build “bridges” between blockchains similar to the ones in the crypto world. However, these bridges can also make a digital infrastructure vulnerable to cyberattacks.
Who will flourish and who is at most risk?
Some activities are likely to shrink as more capital‑markets workflows move on‑chain, some may be eliminated altogether. For example, utilities whose main role is aligning disparate data sets for matching purposes may become obsolete. At the same time, there will be new opportunity for asset managers to access a set of investor base that was previously unavailable. We have already seen money market funds become a ‘currency” in the crypto world through tokenization.
Incumbents must prepare to leverage the shift. Asset managers could start structuring funds with tokenized share classes. Brokers and exchanges can pilot token‑native listings. Clearing and settlement agents can embed tokenization into existing workflows.
Regulatory clarity and interoperable design will determine how fast the curve steepens, but the direction is now clear. Tokenization is becoming an infrastructure story for 2026. Are you ready?