Banks and capital markets are entering a new era. Three forces are converging to push tokenization from pilot projects into the core of financial markets.
Today, blockchain technology is creating new possibilities for how we represent, trade, and manage assets. Asset tokenization converts traditional assets into digital tokens that exist on blockchain networks. These tokens can represent anything from a fraction of a building to shares in a company, or even commodities like gold.
- Regulatory clarity is emerging across leading markets;
- The technology stack has matured into enterprise-grade infrastructure, and;
- Institutions are moving from proof-of-concept to production at scale.
Together, these forces are reshaping how banks and capital markets issue, trade, and settle assets, signaling that tokenization is no longer optional, but inevitable.
The World Economic Forum calls tokenization “the next generation of value exchange,” reshaping how securities are issued, traded, and settled. Meanwhile, Andreessen Horowitz (a16z) observes that financial institutions are no longer debating if or when to embrace tokenization, but “how now” to implement it at scale.
The business case is compelling. The WEF estimates tokenization could save the financial industry 15–20 billion USD annually in operational costs, while freeing more than $100 billion USD in capital each year through more efficient collateral management (WEF, May 2025).
I. What is Asset Tokenization?
Tokenization is the process of representing financial instruments or money itself as digital tokens on distributed ledgers (DLT).
Reports by the GFMA and BCG distinguish between:
- Tokenized Securities: traditional instruments mirrored digitally as a “twin” token.
- Security Tokens: instruments issued natively on-chain.
Equally important is the rise of tokenized cash:
- Stablecoins: privately issued, fiat-backed digital tokens, now gaining regulatory oversight (e.g., U.S. GENIUS Act, Hong Kong’s Stablecoin Bill).
- Tokenized Deposits: commercial bank deposits issued as digital tokens, transferable in real time.
Together, these form the settlement backbone of tokenized markets, enabling atomic delivery-versus-payment (DvP) and programmable cash flows.
How it works: the mechanics
At the heart of tokenization are smart contracts, which encode the rules for issuance, transfers, and redemption. These automate:
- Corporate actions (interest payments, dividends).
- Compliance checks (whitelisting, transfer restrictions).
- Lifecycle events (maturity, redemption, liquidation).
For settlement, tokenized money (stablecoins or tokenized deposits) is critical. These digital cash instruments allow instant, on-chain settlement — replacing lengthy clearing cycles with atomic, risk-free transactions.
Custody is another building block. Banks now deploy MPC wallets or repurpose their existing HSMs and integrate compliance workflows to satisfy institutional and regulatory standards.
The importance of token standards
Standards are what make tokenization practical. Without common rules, every issuer and investor would operate on incompatible infrastructures. Token standards define how digital assets behave, ensuring interoperability across chains, wallets, custodians, and exchanges.
Most tokenized assets today are issued on EVM-compatible blockchains, with Ethereum alone hosting more than 60% of all tokenized real-world assets (Cointelegraph, Jun 2025).
ERC-20: The Foundation
ERC-20 is the most widely used token standard. It defines a simple interface for fungible tokens: balances, transfers, and approvals. Stablecoins like USDC and USDT, as well as tokenized funds and bonds, often use this standard due to its ubiquity.
For financial institutions, ERC-20 provides a reliable baseline, but it lacks compliance and role-management features critical for regulated markets.
ERC-3643: A Standard for Regulated Assets
ERC-3643 extends ERC-20 with compliance logic, making it suitable for securities:
- On-chain compliance checks ensure only approved investors (KYC/AML-screened) can transact.
- Role-based permissions allow issuers, regulators, and transfer agents to enforce restrictions.
- Upgradability supports evolving regulations and ensures full audit trails.
This standard has become the de facto choice for regulated tokenized securities like bonds and funds. It bridges the gap between open blockchain systems and strict securities regulation.
Why Standards Matter
Adoption of standards like ERC-20 and ERC-3643 across EVM-compatible chains ensures interoperability. A token issued on one chain can be bridged to another while preserving compliance. Standards lower integration costs, enable secondary trading, and future-proof tokenized markets.
Types of assets being tokenized
Tokenization is no longer theoretical - it is delivering measurable impact across securities and money:
Stablecoins
- Stablecoin transactions reached $650–700 billion per month in Q1 2025.
- U.S. and Hong Kong now regulate fiat-backed stablecoin issuers.
Tokenized Deposits
- MAS and major banks are piloting tokenized deposits under Project Guardian.
Bond/Fixed Income Tokenization
- UBS issued a CHF 375 million digital bond on SIX Digital Exchange with instant settlement.
- AIIB launched a $500 million digital bond via Euroclear’s D-FMI.
- WEF finds tokenized bonds can cut underwriting fees by 0.22% of par value, reduce bid–ask spreads by 5.3%, and save up to 1,000 person-hours by automating 2,000 tasks.
Fund/Money Market Fund (MMF) Tokenization
- Franklin Templeton’s FOBXX surpassed 740 million USD in AUM on-chain.
- BlackRock’s BUIDL fund crossed 2 billion USD in AUM.
Collateral/Repo
- J.P. Morgan’s Kinexys has processed over 1.5 trillion USD in tokenized repos.
Equity Tokenization
- QFC is experimenting with tokenization of private shares, enabling companies to issue and trade tokens, enhancing access to capital and promoting liquidity.
II. Why Now?: The Convergence
Regulatory clarity
Perhaps the most critical enabler of tokenization’s shift from pilot to production is the wave of regulatory clarity emerging across key markets. For years, uncertainty around how digital securities, stablecoins, and tokenized deposits would be classified slowed institutional adoption. In 2024–2025, that uncertainty has started to lift.
In the United States, the passage of the GENIUS Act (July 2025) created a long-awaited federal framework for stablecoins, giving banks explicit authority to issue fiat-backed tokens. This closes a gap that had left institutions operating under patchy state-level rules.
In Hong Kong, the Stablecoin Bill passed in May 2025 (effective August) requires licensing, reserve backing, and regular audits, giving both issuers and investors a clear framework for participation. The Hong Kong Monetary Authority has gone further by committing to making tokenized bonds a standard tool for sovereign issuance.
In Singapore, the Monetary Authority of Singapore (MAS) published a paper titled “Use of Tokenized Bank Liabilities for Transaction Banking” in July 2025. This formalizes Project Guardian’s momentum into a clear regulatory roadmap.
Globally, the EU’s MiCA, Dubai’s VARA, and the UK’s FMI sandbox are adding momentum, creating a patchwork of regimes that increasingly converge.
The signal is clear: regulators are moving from exploration to enforcement, paving the way for scaled adoption.
Technological readiness
Tokenization has shifted from theory to practice because the infrastructure is finally mature enough for large-scale deployment. Early pilots often encounter challenges related to compliance, integration, and interoperability. Today, those barriers have been mainly addressed.
Compliance and regulatory alignment are now built directly into tokenization workflows. Smart contracts can enforce whitelists, jurisdictional restrictions, and lock-ups automatically, reducing operational risk while keeping issuers in line with securities law. Standards are central to this progress: ERC-20 provides a universal base for fungible tokens, while ERC-3643 extends that model with on-chain identity and transfer permissions, making regulated securities practical on public blockchains.
Another critical shift is multi-chain flexibility. With EVM compatibility, institutions can issue and manage assets across Ethereum, Polygon, Avalanche, or Base while still integrating with existing custody, trading, and compliance systems. This cross-chain operability lowers integration costs, avoids chain-level lock-in, and supports scalability as new networks emerge.
The ecosystem has also matured around supporting services, from identity verification providers to institutional-grade analytics and reporting tools, giving banks confidence to launch products that meet both client and regulator expectations.
In short, compliance is programmable, interoperability is proven, and scalability is achievable. Tokenization is ready for enterprise adoption.
Institutional adoption
While technology and regulation set the stage, institutional adoption is the true signal that tokenization has arrived. In 2018, tokenization was largely confined to pilots in innovation labs. Fast forward to 2025, and leading global banks and asset managers are scaling solutions into production.
The most visible proof is in live volumes. J.P. Morgan’s Kinexys platform has already processed over 1.5 trillion USD in tokenized repo transactions, demonstrating day-to-day utility in one of finance’s most systemically important markets. On the buy-side, BlackRock’s BUIDL fund has surpassed 2 billion USD in tokenized AUM, and Franklin Templeton’s FOBXX fund continues to grow past 740 million USD on-chain. These aren’t experiments, they’re mainstream products.
In Europe, KBC Group has been in production with Kate Coin, a euro-denominated token integrated into retail banking services, for several years, demonstrating how tokenized and programmable money can work at scale in customer-facing environments. In parallel, KBC Securities, KBC’s digital investment arm, launched tokenized fixed income products for SME’s in November 2023, which has run in continuous production since.
In Asia, OCBC Bank became the first in Singapore to take tokenization into full production with corporate bonds for treasury management in January 2025, a regulatory and market milestone under MAS oversight. This launch shows that tokenization is not just a lab experiment, but part of daily treasury and capital markets operations.
Industry analysts are now projecting exponential growth. McKinsey forecasts 4–5 trillion USD in digital securities issuance by 2030, while EY reports that over 90% of HNW investors expect to allocate to tokenized bonds in the coming years.
The signal is clear: tokenization has moved beyond hype cycles. It is now a competitive necessity, with Tier-1 institutions, from KBC and OCBC to JPMorgan and BlackRock, proving that efficiency, liquidity, and compliance gains are real.
III. From Market Momentum to Deployment
The benefits are real: reduced costs, faster settlement, and broader access. But banks still ask: how to deploy across use cases efficiently while staying compliant?
This is where SettleMint provides the answer.
SettleMint's Asset Tokenization Kit
SettleMint’s platform is built for developer empowerment: it gives engineering teams the tools and flexibility to design, customize, and deploy tokenized assets without fighting the complexity of blockchain infrastructure.
Supported asset types
Features
- Click-and-deploy approach that lets you set up infrastructure in minutes, and it just runs.
- Flexible Development Environment for rapid deployment and full customization.
- Pre-audited smart contracts aligned with ERC standards:
- ERC-20 and variants: tokens like stablecoins and tokenized deposits.
- Enhanced ERC-3643: advanced version embedding role management, modular compliance, and KYC/AML integration.
- Multi-standard deployment: issue and manage ERC-20, ERC-3643, or other frameworks side-by-side, all with full transparency and control.
- Upgradeable: a constant in financial markets is change, smart contracts are not immune and will need upgrades.
- Compliance hooks (identity, whitelists, AML/KYC).
- Multi-chain deployment with developer-friendly tooling.
- Real-time dashboards for issuers, regulators, and auditors.
- Host Anywhere: our cloud, your cloud, your data center. Deploy where you like.
IV. Benefits for Banks and Capital Markets
- Launch Fast
Full-stack application development tools to get to market fast without sacrificing quality or security. - Issue and Settle Fast
Issuance and settlement in seconds, not days or weeks. - Interoperability
Multi-standard, EVM-compatible. - Developer empowerment
APIs, SDKs, and smart contract libraries that accelerate delivery while keeping developers in full control. - Future-proof
Regulatory dashboard to enforce compliance with regulatory frameworks up front. - Compliance by design
On-chain checks and controls. - Investor demand = new revenue, if you move first
EY reports that by 2026, 91% of HNW investors and 83% of institutions plan to allocate to tokenized bonds, expecting even modest yield improvements. - Save Cost
GFMA reports that tokenizing an investment-grade bond can reduce operating costs by 40–60% compared to traditional issuance, largely by automating workflow.
Tokenization is moving fast. Bonds, funds, and equities are on-chain. Money itself, via stablecoins and tokenized deposits, is now programmable and regulated. Standards like ERC-20 and ERC-3643 ensure these assets remain interoperable across chains, unlocking real efficiency.
With our Asset Tokenization Kit, SettleMint delivers regulator-ready infrastructure to issue, manage, and settle assets across multiple standards; empowering developers, satisfying regulators, and creating investor confidence.
The winners in this new financial era will be those who act now. The future of finance is tokenized.
Next steps
Schedule a consultation with our team to discuss how the Asset Tokenization Kit can address your specific use case.