Tokenization will only be significant when it generates trillions.

In early September, Nasdaq submitted a proposal to the SEC to permit tokenized stocks and exchange-traded products (ETPs) to be traded on its platform. At first glance, this may seem like a significant advancement for crypto — blockchain is finally making inroads into U.S. markets. However, securities have been “digital” for many years. The true innovation lies not in blockchain-wrapped stocks, but in whether tokenization can enhance market speed, intelligence, and efficiency. Can blockchain technology and tokenization create a more fluid collateral system, eliminate settlement friction, and ensure interoperability between traditional and digital systems?

The promise here is clear: Tokenization has the potential to enhance the operation of these markets, serving as a tool to unlock features like intraday liquidity, programmable collateral, and seamless stablecoin integration in ways that the outdated T+1 infrastructure cannot.

From paper to digital

For much of the 20th century, stock ownership meant possessing a paper certificate. By the late 1960s, Wall Street was overwhelmed with paperwork. The so-called “paperwork crisis” forced the NYSE to reduce its trading week and rethink its systems. This led to the creation of the Depository Trust Company in 1973, which solved the issue by locking certificates in a vault and utilizing electronic book-entry records instead. Its parent organization, the Depository Trust & Clearing Corporation (DTCC), is now a cornerstone of U.S. financial markets, managing clearing and settlement for nearly all securities trades. They ensure that ownership transfer and cash transactions occur smoothly, securely, and efficiently without extensive paper documentation.

Subsequent innovations in London, Europe, and Japan with CREST, Euroclear, and JASDEC in the late 80s and 90s shifted from immobilized certificates to complete dematerialization. Today, securities are inherently digital: ownership is monitored, logged, and settled through centralized systems. In this context, blockchain technology represents less of a revolution for the assets and more of a novel method for recording them. To me, all blockchain innovations are superficial unless they offer substantial operational or financial enhancements beyond what current systems can achieve.

Tokenization by itself won’t reshape the market. It changes the ledger and broadens capital markets opportunities, prompting questions such as: can collateral assets traverse the ledger more rapidly? Can interest-bearing assets coexist seamlessly with stablecoins? Can we achieve capital efficiencies unattainable with legacy systems? What additional value can this unlock?

Collateral mobility

The most intriguing potential for tokenized assets lies in collateral mobility. This concept — swiftly transferring and utilizing assets across institutions — is crucial for liquidity, margins, and risk management. Tokenization broadens this ability far beyond traditional frameworks, enabling collateral to be seamlessly transitioned, reused, and programmably moved on-chain without legacy bottlenecks. With financial markets becoming more interlinked, the demand for flexible, token-driven collateral management solutions is increasingly essential.

However, it’s crucial to note that digital assets currently represent a small segment of the overall market. The global fixed income market is projected to be $145.1 trillion in 2024. With Treasuries doubling the issuance alone at about $22.3 trillion as of late September, representing a market cap eight times greater than that of the entire crypto sector. Thus, the mere enthusiasm for blockchain technology won’t significantly affect these traditional assets. These instruments are cash-like, forming the foundation of short-term liquidity with repo, refinancing, and margin solutions, where rapid transfers and reusable collateral are essential. Therefore, these assets are prime candidates for tokenization. The crypto focus merely aids in bridging the gap.

Stablecoins, mainly supported by Treasuries and yield-bearing cash-equivalent investments, are driving this transformation as they become tools for banks to lower settlement costs and expedite transfers. According to a recent report by EY, stablecoins may constitute 5-10% of global payments, equating to $2.1 trillion to $4.2 trillion in value. Meanwhile, the CFTC is considering the allowance of stablecoins like USDC and Tether as collateral in U.S. derivative markets. If authorized, stablecoins will accompany Treasuries and high-grade bonds, necessitating an infrastructure capable of large-scale asset mobilization and transformation.

Looking ahead: Markets in motion

In the coming years, we will see if tokenized collateral becomes a mere novelty or a revolutionary change. By 2026, the excitement will be evident. Banks and asset managers are eager to experiment with tokenized bonds and stablecoins in select workflows, focusing on high-grade investment options. Stablecoins may begin to complement traditional cash in clearing and settlement processes, particularly in derivatives markets. Early adopters utilizing tokenized Treasuries and high-grade bonds may find slight capital inefficiencies, although tokenization will primarily be restricted to liquid, standardized products.

By 2030, a dramatic transformation could occur. Tokenized bonds, funds, and stablecoins could become standard collateral throughout institutions. Tokenized Treasuries and corporate bonds might represent a considerable portion of liquidity and rehypothecation markets. Widespread adoption of stablecoins by banks could facilitate swifter, cheaper, and more transparent settlement and collateral flows. In this scenario, infrastructure for collateral transformation — the capability to move, reuse, and integrate tokenized assets with stablecoins and traditional securities — will be pivotal. Firms that excel in this area will not only grasp the crypto landscape but also effectively manage the complexities involved in modern collateral management.

These trends signal more than just technology-driven aspirations; they are operational necessities. Traders and market participants will need to manage capital adeptly by moving collateral smoothly between tokenized securities, bonds, and stablecoins. As markets increasingly embrace digital collateral, success will depend on robust systems encompassing risk management, financing, transformation, movement, and internalization of these assets. Institutions that actively engage with these evolving frameworks, turning experimental initiatives into standard operations, will be better equipped to handle the realities of tokenized collateral markets as they expand in the coming decade.

So what

Nasdaq’s regulatory change signifies an essential step in the ongoing digital transformation of financial markets but is merely the starting point. Securities have been digital for years, and tokenization by itself offers little innovation unless it creates systems that enable effective transformation, reuse, and movement of collateral. The true impact will derive from unlocking the utility and efficiency of vast asset pools (e.g., Treasuries, corporate bonds, private credit, etc.) and harmonizing them with new digital instruments like stablecoins — where the role of infrastructure developers will be crucial. The future of finance revolves around more than just managing assets on a blockchain; it’s about making them interoperable, fungible, and strategically exploitative across the entire financial spectrum.

This represents a potential new frontier for capital markets — an intersection where technology, risk management, and operational excellence converge. Whether crypto plays a role or not, the pursuit of enhanced capital efficiency remains the quiet but vital lifeblood of any serious financial firm. It fosters long-term sustainability, positions firms to adeptly navigate shifting market conditions, and establishes a genuine competitive edge.

Capital efficiency provides more than simple operational advantages. It grants financial freedom, protects firms from unpredictable market fluctuations, and offers flexibility in strategic decision-making. By optimizing resource allocation, a firm can dictate its destiny: delivering better pricing, securing higher margins, and strengthening its market presence, thus outperforming rivals who may lack efficiency in capital deployment. Tokenization isn’t just about digitizing assets; it’s about liberating the mobility, interoperability, and strategic utility of collateral that actualizes this efficiency. Early adopters will not only function smarter; they will establish benchmarks for the modern marketplace.

Emily Sutherland

Emily Sutherland is the Head of Product at Cor Prime, with over 10 years of experience in institutional product strategy and development. She has held senior roles at Galaxy Digital, Bridgewater Associates, and CAIS. Her current focus lies in areas related to crypto credit and prime brokerage. With a background in English and journalism, Emily enjoys simplifying complex financial concepts. She is fluent in Japanese, graduated from Colby College, and is an avid distance runner.