How has the conversation around tokenization shifted as institutional investors and asset managers get more involved?
Instead of focusing on the tokenization of specific assets, organizations are now considering how to remove market friction to drive measurable ROI. Before the advent of blockchain, financial instruments—like commodities—had already been converted into digital assets for the benefit of retail investors (think exchange-traded funds). But this didn’t alter how traditional capital markets operate.
The rise of blockchain changed that dynamic because it reduced reliance on third-party intermediaries, accelerating settlement times in the process. This sparked a wave of cryptocurrency speculation as retail investors tried to capitalize on the digital asset trend.
Now, as institutional adoption accelerates, tokenization is being reframed as a tool for modernizing the underlying financial infrastructure. A wider range of real-world assets are being recast as tokenized products, laying the groundwork for a new wave of market innovation.
Critically, this is less about which assets are being tokenized and more about the technological capacity to enable programmable ownership records (like smart contracts), reduce reconciliation friction, and create a post-trade infrastructure that supports near-instant settlement. This value proposition is shifting tokenization from an experimental concept towards mainstream institutional use cases.
Beyond these capital market benefits, does tokenization help improve liquidity for private market companies or their private equity investors?
With companies choosing to stay private longer, many face pressure to unlock liquidity for their investors and employees. Today, this typically happens through tender offers and secondary transactions, at least partly due to ongoing reliance on legacy infrastructure.
Tokenization could help support greater liquidity by reducing friction and alleviating operational overhead. While liquidity will still be driven by natural economic supply (willing issuers) and demand (retail and institutional investors), tokenization can help modernize the underlying plumbing of the financial markets, streamlining the way in which liquidity is accessed. For example, through blockchain, accredited investor statuses could be tokenized, as could issuer-defined restrictions on permissible purchasers. Naturally embedding these rules into workflows could eliminate many of today’s bottlenecks, creating a frictionless opportunity for liquidity.
This technological evolution also enables institutions to convert traditionally illiquid assets—including private equity holdings—into digital assets, allowing for fractional ownership and even secondary transferability in some cases. From an operational perspective, this could provide institutions with greater balance sheet flexibility without requiring them to fully exit their private company positions. That said, liquid private markets will require organizations to pivot their business models.
So, while tokenization of real-world assets doesn’t instantly create private market liquidity, it can be used as a tool to opportunistically create liquidity where it might be needed.
What other promising use cases are emerging today?
As with any technological evolution, many early-stage organizational use cases aim to address everyday issues. Increasingly, we’re seeing the tokenization of money market funds and short-term credit. Financial institutions are exploring tokenization’s potential for collateral mobility and intraday liquidity management. Investment banks and other financial firms, including Morgan Stanley, are now offering clients exposure to digital assets in their portfolios. Many companies are also adapting their systems to accept or send payments in digital currencies.
The use cases most likely to gain early traction are those that help solve existing institutional problems and correspond to behaviors they’re already used to. Tokenization is just allowing them to do so faster, with improved transparency and operational efficiency.
However, as the technology and infrastructure mature, and the market comes to recognize the benefits, we will likely see quick adaptation that may extend to the tokenization of alternative assets and funds, along with expanded access through wealth platforms. This could extend to the tokenization of a subset of assets by private companies testing the market for pre-IPO demand, or even the creation of “founders’ funds” that allow private company founders to invest in their peers’ shares.
Looking ahead, how might tokenization reshape access to private markets, both for institutions and for a broader investor base?
While tokenization is unlikely to create a fully liquid private share marketplace, it does make liquidity possible where it was previously impractical.
Since their inception, global financial markets have operated under onerous and complex mandates that required reliance on numerous counterparties, manual documentation, and protracted trade settlement. The rapid evolution of technology is now changing that game. Tokenization allows us to bring financial markets into the age of digitization by enabling a seamless and efficient process that reduces friction and cost.
This isn’t to imply that we’re heralding a free-for-all. Accredited investor rules, regulatory guardrails, and know your client (KYC) requirements remain foundational concepts. This means institutions retain a critical role as the gatekeepers responsible for assuring quality, compliance, and effective structuring. By lowering the barriers to entry, however, the distribution of previously illiquid assets becomes more efficient. Over time, this can provide institutions with unprecedented levels of optionality, while giving retail investors access to assets that were historically inaccessible.
