Beyond Curiosity: Exploring The Applications of DLT within Large Financial Institutions and their Clients
A compilation and analysis of research efforts conducted by global financial institutions, global systems integrators/consultants, and regulators, curated and excerpted by Vertalo.
The Vertalo team aggregated and summarized key findings from 19 reports spanning 2021-2023, by analyzing and normalizing data from whitepapers and research reports written and performed by analysts at major financial institutions, global consulting firms and non-profits. The whitepapers and research reports covered and collected end-user feedback on the topic of institutional adoption of digital assets, blockchain (distributed ledger technology) and tokenization with the goal to curate and summarize themes and findings uncovered by major players and thought leaders from the‘TradFi’ and ‘Web3’ communities. None of the information presented in this report - other than some pattern analysis - is owned or originally created by Vertalo; all content has been aggregated from publicly available external sources which have been source-linked in each report.
We list out the reports that we curated by year below. For most reports, there are links to the original source material.
2023 Reports
State Street -
Report: “Digital Assets Survey”
Authors: State Street
Published: January 2023
Report Type: Survey
Survey Size: 300
Survey Participants: Investment Management (26%), Head of Digital/Innovation (25%), Investment Ops and/or Technology (25%), CEO/Head of Corporate Strategy with oversight of all functions above (24%)
When asked about how tokenization will change holding and distributing asset classes, executives said tokenization will:
58% increase transparency
49% lead to faster and more efficient trading
47% lower compliance costs and significantly reduce risk
46% significantly reduce transaction management costs
Most executives say their digital asset allocations have either not changed or have only changed slightly in the past 12 months (73%); even more expect little or no changes over the next 12 months (82%). However, more than two-thirds (69%) expect to significantly or slightly increase their allocation in the next 2–5 years.
Roughly half believe private equity (51%) and roughly half believe physical assets (48%) will be the first to be tokenized and routinely traded digitally, but not for at least 5 years. In the fund industry, 23% expect it to take 5–9 years for digital trading to become a commonplace means of transferring mainstream assets, while 37% expect it to take 10+ years.
Executives see value in digital asset services, but their implementation plans vary. When asked about which digital asset services would be most useful to their firm, executives were most likely to select digital distribution mechanisms (41%), asset/fund issuance and tokenization (37%), and digital fund administration and accounting services (34%) as their top three.
Plans for in-house implementation are more popular than outsourcing for investing in and trading the assets (47% in-house, vs. 19% outsourced); for asset/fund issuance and tokenization (38% vs. 28%); for a complete, unified view of all assets (39% vs. 35%); and for cybersecurity (46% vs. 30%). On the other hand, outsourcing is more popular than in-house implementation for distributed ledger/blockchain network creation/maintenance (34% in-house, vs. 37% outsourced), smart contract generation (34% vs. 43%), and digital asset prime brokerage services and collateral management (32% vs. 48%).
Bain & Company -
Report: “Global Private Equity Report: Web3 Remains Highly Relevant for Private Equity”
Authors: Thomas Olsen, Gene Rapoport, Alexander Mitscherlich, Kelly Pu, Parker DeRensis
Published: February 2023
Report Type: Analyst Report
Whether you’re an investor funding the next generation of IT infrastructure, a fund manager performing due diligence on traditional companies exposed to web3 changes, or a PE strategist evaluating new types of funds and distribution channels, web3 is very likely to emerge as a critical theme over the next 10 years.
Major companies across industries—JPMorgan, Goldman Sachs, Google, and Disney among them—have begun to think about how web3 will influence their businesses and what it could unlock in terms of managing transactions and engaging with customers.
Forward-thinking private equity firms are also focused on the ways in which blockchains, tokens, smart contracts, and related web3 technologies will affect how they invest and operate. We [Bain] sees three important ways in which web3 is becoming increasingly relevant for private equity: As an investment theme, as a disruptive threat (or opportunity) for the portfolio, and as a tool for new fund strategies.
Over the next decade, the burgeoning set of web3 innovations could affect a broad sweep of industries and companies, some of which aren’t necessarily obvious today, particularly financial services, tech/telecom, and sports/entertainment.
Half of the world’s investable wealth is owned by individuals. Yet these investors account for only 16% of the AUM held by alternative funds. Tokenization is one way to tap this vast market.
Inefficient, illiquid markets with easy-to-authenticate assets, like private equity, private debt, and private real estate, probably have the most to gain [from tokenization].
Financial insights:
$94 Billion - approximate amount of start-up capital invested into thousands of Web3 companies since 2021.
$49 Billion - approximate amount of investment into Web3 specifically for financial market infrastructure to date.
ONYX by JPMorgan -
Report: “Deposit Tokens: A foundation for stable digital money”
Authors: Oliver Wyman Forum, Onyx by J.P. Morgan
Published: March 2023
Report Type: Whitepaper
Digital Asset Project(s): Project Guardian, JPM Coin System, SGD Deposit Tokens by JPMorgan
We believe deposit tokens will become a widely used form of money within the digital asset ecosystem, just as commercial bank money in the form of bank deposits makes up over 90% of circulating money today.
Deposit tokens can support a variety of use cases as commercial bank money does today, including domestic and cross-border payments, trading and settlement, and provision of cash collateral.
The token form enables new functionality, such as programmability and instant, atomic settlement to speed up transactions and automate sophisticated payment operations.
Deposit tokens also operate as a realistic alternative to stablecoins, on both public and permissioned blockchain environments, and can be offered organically within the regulatory and commercial framework applicable to modern banking institutions.
Their [deposit tokens] technical features, alignment with well-established bank regulatory frameworks, and their natural integration with financial services via the banking sector positions deposit tokens to be a stabilizing anchor within the digital money landscape, while ushering in a new era of enhancement for commercial bank money, the world’s most used form of money.
“In 2020, it cost US $120 billion and on average took 2-3 days in settlement to move US$23.5 trillion across borders.
And while we estimate that a multi-currency CBDC could cut costs by 80%, down to approximately US$20 billion, deposit tokens could unlock similar benefits by reducing fees, settlement times, and counterparty risks, and by enabling more direct funds transfers.”
Fidelity Digital Assets -
Institutional Investor Digital Assets Study: Key Findings
Exploring Institutional Interest in Blockchain Applications and Digital Asset Uses
Report(s): 1)“Institutional Investor Digital Assets Study: Key Findings” and 2) “Exploring Institutional Interest in Blockchain Applications and Digital Asset Uses”
Author: Fidelity Consulting and Strategic Insights with Fidelity Digital Assets and the Fidelity Center for Applied Technology
Published: October 2022 & April 2023
Report Type: Survey
Survey Size: 1,052 total respondents (410 U.S. investors, 359 European investors, and 283 Asian investors.)
Survey Participants: Institutional Investors
Institutional investors surveyed report that the features of digital assets that they find most appealing are the high potential upside, innovative tech play, and enablement of decentralization.
58% of institutional investors responded that they were invested in digital assets globally.
Adoption and consideration of digital assets among those surveyed is highest among high-net-worth investors, crypto hedge funds/venture capital, and financial advisors.
Most investors are split on whether environmental concerns affect their decision to invest in digital assets, with 48% citing “no impact” and 40% “less likely” to invest.
Investors revealed security and safety, ease of use, and regulatory status as the most important characteristics when choosing a digital asset custodian.
Almost 4 in 10 investors indicated they participate in DeFi, with the highest levels of participation in Europe at 50%.
Half of institutional investors surveyed are now familiar with bitcoin mining, up from last year and driven by increases in Europe and the U.S.
42% of institutional investors surveyed find the implementation of a central bank digital currency (CBDC) appealing, up two points from last year, driven by interest expressed from European respondents. CBDCs continue to have the highest appeal among Asian and European investors surveyed.
81% of respondents revealed they believed digital assets should be part of a portfolio.
74% of respondents planned to buy or invest in digital assets in the future, up from 71% in 2021.
51% of those surveyed who had a positive perception of digital assets.
EY Parthenon -
Report: “How Tokenization in Asset Management is Driving Meaningful Opportunity”
Authors: Ernst & Young’s: Sara Elinson & Prashant Kher
Published: May 2023
Report Type: Survey
Survey Size: 329
Survey Participants: Accredited/high-net-worth (HNW) investors (251) and Institutional asset investors (78) in the U.S. See report for full details of participant group*
Asset managers are increasingly interested in tokenization, both at the fund and asset level, due to the multitude of benefits it offers: new sources of capital, increased liquidity, operational efficiency and enhanced portfolio construction.
By the end of 2024, 74% of high-net-worth (HNW) investors plan on investing in tokenized alternatives, compared to only 42% of institutional investors. These percentages jump to 65% for institutional and 78% for HNW investors by 2026.
By 2026, Institutional investors plan to allocate 5.6% of their portfolio to tokenized assets, while HNW investors said they plan to allocate 8.6%.
63% of institutional and 59% of HNW investors ranked private equity as the No. 1 or No. 2 tokenized alternative of interest, with real estate as a close second. 63% of institutional investors would consider investing in tokenized RE investments without voting power if it meant lower investment minimums.
86% of institutional investors ranked alternatives as the top tokenized asset class they would be interested in investing in compared to 62% of HNW investors.
55% of HNW investors want access/better access to alternatives. 45% of HNW investors would be willing to pay higher fees to access direct real estate equity; of these, the majority would pay between 0-50bps.
57% of institutional investors expect lower fees on tokenized assets vs. comparable traditionally issued assets, while 50% of high-net-worth (HNW) investors expect to pay higher fees on tokenized assets if it gets them access to the assets they typically can’t invest in.
80% of high-net-worth (HNW) and 77% of institutional investors want distribution of tokenized assets to through traditional financial institutions.
56% of institutional investors see increased liquidity as the top driver to invest in tokenized asset. 58% of HNW investors see lower transaction costs as the top driver.
49% of institutional investors see uncertain regulatory environment as the No. 1 hurdle for tokenization vs. 24% of HNW investors.
42% of HNW investors prefer ownership of part of a tokenized fund vs. 27% being interested in tokens that represented a single asset. Institutional investors are evenly split on one vs. the other.
Bank of America Securities -
Report: “Beyond Crypto: Tokenization”
Authors: Alkesh Shah & Andrew Moss, Crypto & Digital Assets Strategy, Bank of America
Published: June 2023
Report Type: Analyst Report
Traditional asset tokenization may reach $16tn+, transforming infrastructure and markets over the next 5-15 yrs
Our view is that the tokenization of traditional assets and issuance of assets in tokenized form have the potential to increase efficiencies and reduce costs across an asset's life cycle, improve the efficient allocation of capital, optimize global supply chains, catalyze a new generation of software-as-a-service (SaaS) companies and ultimately drive mainstream adoption.
FIs are increasingly leveraging DLT/BCT, smart contracts and tokenization to enable 24/7 real-time or customizable settlement; reduce credit risk; lower settlement, financing and operational costs; increase liquidity for previously illiquid assets; and allocate capital more efficiently.
DLT/BCT-powered infrastructure may also enable the creation of new and more efficient products and applications that were too expensive or impractical to create on today's financial systems.
Settlement costs are rising ~14% each year and 5-10% of trades fail each day, driven largely by human error and the seven non-interoperable systems for which the average trade is routed, indicating the significant implications that a distributed (shared) ledger enabling real-time, or customizable, settlement provides.
Corporate DLT/BCT use cases are diverse and expanding. Corporates are also incorporating DLT/BCT-powered platforms and tokenization use cases to optimize supply chains, increase customer loyalty, combat counterfeiting and offset contributions to climate change.
50%+ of Fortune 100 companies have launched projects leveraging DLT/BCT since the beginning of 2020.
27% of settlement systems today still leverage legacy infrastructure that is over 20 years old
33%+ of payment data was validated manually in 2020.
$4tn amount held as collateral that DLT/BCT infrastructure could unlock to be reallocated to yield-bearing assets.
Monetary Authority of Singapore (MAS) -
Report: “Project Guardian - Enabling Open and Interoperable Networks”
Authors: Co-developed and published by Monetary Authority of Singapore and the Bank for International Settlements with contributions from DBS, HSBC, SBI Digital Asset Holdings, UOB, Marketnode, Standard Chartered, and Onyx by J.P. Morgan
Published: June 2023
Report Type: Whitepaper
Digital Asset Project(s): Project Guardian
While much of the public and media attention has focused on the speculation of unbacked digital assets, the real value in the digital asset ecosystem comes from the representation of real-economy and financial assets digitally in a tokenised form using smart contract technology to enhance the efficiency, accessibility, and affordability of financial services.
Distributed ledgers offer the potential for transactions to be performed on a peer-to-peer basis without centralised intermediaries. Meanwhile, the use of smart contracts to model financial transactions such as borrowing, lending, and trading activities enable financial activities to be performed autonomously.
The advancements in digital technology in the form of digital assets and distributed ledgers hold promise to facilitate the growth of cross-border transactions.
Unless digital asset networks are interoperable, both with each other and with traditional FMIs, fragmentation would reduce the network benefits and can create frictions such as inaccessibility, increased liquidity requirements due to separation of liquidity pools, and pricing arbitrage.
By utilising DLT, structured products that are created digitally can be safekept and distributed using distributed ledgers on-chain, reducing creation and distribution times.
The transformation of trade assets into native digital tokens could broaden the investor base for real economy assets. Additionally, standardisation and automation efforts are expected to bring cost savings in the set-up and ongoing operations.
McKinsey & Company -
Report: “Tokenization: A digital-asset déjà vu”
Authors: McKinsey & Company’s: Anutosh Banerjee, Ian De Bode, Matthieu de Vergnes, Matt Higginson, and Julian Sevillano
Published: August 2023
Report Type: Article
Tokenization adoption was poised for success six years ago, but progress was limited. Renewed interest might feel like déjà vu, but stronger business fundamentals and structural changes suggest the path could be different this time. In financial services, the emphasis is shifting to the reemergence of a “blockchain, not crypto” narrative.
Tokenization can benefit assets owners, service providers, and/or investors through improve capital efficiency, democratization of access to new pools of capital or secondary markets, operational cost savings, enhanced compliance, auditability, and transparency, and a cheaper and more nimble infrastructure.
Despite the benefits, conditions that pose challenges to widespread adoption to date are related to infrastructure limitations, implementation costs, market maturity, regulation, and industry alignment.
Many of tokenization’s potential economic benefits come to fruition at scale, when a sizable majority of assets or use case volumes have migrated to the new digital infrastructure. However, this will likely require a cost-intensive transition to adapt middle- and back-office workflows not designed for tokenized assets.
Tokenization’s ability to achieve faster settlement times and greater capital efficiency requires instantaneous cash settlement. However, there currently exists no cross-bank solution at scale, despite the progress that has been made on this front: tokenized deposits currently operate only within a single bank, and stablecoins lack the regulatory clarity for now to be considered bearer assets to provide for real-time ubiquitous settlement.
To date, the regulatory framework for tokenization has differed substantially by region or has simply been absent. US players are particularly challenged by undefined settlement finality, lack of legally binding status of smart contracts, and unclear requirements for qualified custodians.
Capital market infrastructure players have yet to signal the concerted will to build out tokenization capabilities or move markets on chain, although their involvement is critical, as they are the ultimate recognized holders of books of record.
While tokenization has yet to achieve the scale needed to deliver on all its stated promises, the ecosystem is maturing, underlying challenges are becoming clearer, and the business case for adoption may be improving.
$4-5t projected forecast of issued tokenized digital securities by 2030 by Citigroup
$120b the approximate amount of tokenized cash now in circulation in the form of fully reserved stablecoins (for example, USD Coin).
$500b on-chain Stablecoin monthly volumes, according to Stablecoin data from The Block.
RBC Wealth Management -
Report: “Central Bank Digital Currency and the Future of Money”
Authors: Atul Bhatia, CFA
Published: August 2023
Report Type: Analyst Report
Commercial bank accounts and physical cash are likely to remain at the center of U.S. financial architecture for the foreseeable future.
Electronic payments are on the rise as cash usage declines across the globe, leading an increasing number of governments to think about launching digital versions of their currencies.
Central bank digital currencies, or CBDCs, in theory offer faster and cheaper payments, allow people currently outside the traditional banking system access to financial infrastructure, and could reduce settlement risk and delays on international trade.
Despite the hype around CBDCs, we see a host of security, privacy, and governance concerns that we believe outweigh the theoretical gains on efficiency, and we think it would be quite challenging to line up the necessary political support for an aggressive push toward a digital dollar.
We think the Federal Reserve will continue to emphasize incremental technology improvements versus a risky push to transform the payments infrastructure.
70% consumers across the world wanting to go cashless vs. currency.
42% of respondents, the overall support for launching a CBDC.
130+ Central banks piloting CBDC projects as of 2022.
2022 Reports
Accenture -
Report: “The (R)evolution of money III: CBDC is here, careful design needed now”
Authors: Ousmène Jacques Mandeng, Senior Advisor - Global Blockchain Technology at Accenture
Published: March 2022
Report Type: Analyst Report
Though the timing remains uncertain, the introduction of CBDC as a response to new payment needs and in support of greater diversification, competition and resilience in payments is highly likely.
Any CBDC will need to offer, or be compatible with, a solution to connect legacy with DLT enabled payment systems. This would enable seamless payments across payments infrastructures to support payments innovation, choice and diversification while mitigating the risk of fragmentation of the payments environment.
The merger of payment and settlement would replace the conventional payment, clearing and settlement process and enable an important simplification of payment cycles. The use of CBDC as the native payment instrument on token-based financial market infrastructures would offer end-to-end processing in tokens.
Programmability represents one of the key advantages of tokens and equips tokens with features determined by the issuer and irrespective of the holder. The complexity of the business logic can give rise to new payment use cases and can also serve to ensure set prudential standards are met
There is an ongoing debate about account versus value or token-based approaches. While an account-based approach would rest on the existing payment architecture, a token-based approach would represent central bank money in a new digital token format.
CBDC offers an end-to-end, token-based lifecycle for securities and foreign exchange trading. The advantages of instant and atomic exchanges bring significant benefits and efficiency gains for most large value use cases.
Some market participants may be reluctant to adopt real-time settlement as it would require all transactions to be paid in full at execution. Brokers may struggle to make the necessary financing arrangements.
The costs of cash are elevated and incur rapidly, increasing marginal costs with declining usage. For the European Union, the social cost of using cash is estimated at around 1 percent of GDP (Schmiedel, Kostova, & Ruttenberg, 2021).
Financial inclusion remains incomplete in many countries, particularly in lower income countries. CBDC has often been associated with a new approach to facilitating financial inclusion.
Deloitte -
Report: “Digital Assets and Distributed Ledger Technology: Financial Industry Outlook for 2025”
Authors: Deloitte’s: Jürgen Lademann, Ramona Rueckbeil, Prof. Dr. Alexander Schroff, Tilmann Bolze, Jens H. Paulsen
Published: March 2022
Report Type: Whitepaper
“To secure a leading position and competitive advantage in this emerging industry, financial services firms will need to become early adopters and start developing the necessary infrastructure for issuing, trading and investing in digital assets and currencies today.”
From a capital market perspective, there is already a diversified range of digital assets on offer. Four possible product solutions have already emerged as state-of-the-art, market relevant securities based on cryptographic infrastructure: equity funds, ETP variants, special investment funds and securities denominated in digital currency.
Distributed ledger technology has emerged as a market-relevant technology. DLT allows users to distribute transactions across several participants and their network nodes, without the need for a central authority to administer the trades.
The European Investment Bank issued its first EUR 100m tokenized bond on the Ethereum blockchain in April of this year [2022], which has prompted many asset managers to evaluate the technological upgrades they need to integrate distributed ledger technology into their operating model.
Once companies have built internal capacity for and gained expertise in DLT, we expect the biggest benefits from tokenization to come from alternative assets. This is where the market lacks transparency and requires many different internal and external parties for a single transaction, which results in high cost and effort.
Lastly, we expect cryptocurrencies to become part of an investor’s portfolios as a new form of safe haven and an alternative to fiat currencies and central bank policies.
Tokenized funds will offer a compelling alternative to existing traditional, alternative and passive funds, not only because they reduce trading and processing times, but primarily because they lower trading and administration costs.
As we see it, the biggest opportunity for institutions will be to inspire trust within the digital asset space and assure clients that they offer a safe environment for digital asset trading.
Internation Securities Services Association (ISSA) -
Report: “DLT in the Real World 2022”
Authors: ISSA with sponsorship from Accenture, Broadridge and VMware
Published: May 2022
Report Type: Survey
Survey Size: 148
Survey Participants:
-By segment: Private Bank/Wealth Management (22%), Bank/Custodian/iCSD (22%), Investors (20%), Broker/Investment Bank (16%), Exchange/CSD (12%), Fintech/Neobank (9%)
-By Region: Americas (36%), APAC (25%), Africa & Middle East (4%), Europe (34%)
As DLT experimentation and production continues to scale, nuances around the benefits of DLT in specific usage cases are becoming increasingly central. We’re moving from generic “digital assets” to specific, usage-case-driven applications and benefits.
Live DLT usage has grown by 400% since 2021. In 2021, respondents reported that 8% were using DLT in a live, production environment. In 2022, that number has risen to 32%. Of the remaining respondents in 2021, 21% were in the researching phase, 16% were participating in pilots, and 31% were building [to go live].
When participants were asked which aspects of DLT are users looking to leverage, “instantaneous transactions (‘atomic settlements’)”, “real-time data availability”, and “real time data synchrony” tied as the top choices. Importantly, the benefits of DLT in facilitating digital identity appear to be valued by very few – except for those who have most experience in running DLT projects.
When asked about where DLT is delivering the greatest benefits, respondents indicated that securitised assets were at the top, followed by mutual funds, and private equity. Payments / FX (including CBDC) were ranked as delivering the lowest amount of benefit, just below Equities / ETFs.
For Exchanges/CSDs and Custodians/Banks, 75% of each respectively are building DLT pilots or projects for New product launches. While 58% of Exchanges/CSDs and 48% of Institutional investors are building DLT for internal efficiencies.
In 2022, the first step for 58% of the industry in building out a DLT business plan is to engage with other ecosystem partners; with 43% of the market also prioritising collaborative market initiatives over self-builds.
From 2020 to 2022, the percentage of respondents facing ‘blocking’ issues, such as access to blockchain talent, in their DLT projects has reduced from 31% to 16%. But as our DLT ambition has grown – other issues have become more acute, such as regulatory limitations and connectivity to legacy infrastructures.
For DeFi, 20% of our [ISSA’s] survey respondents are actively investing resources, with almost 10% committing investment spend in 2022. 18% of respondents have “no interest” in DeFi, while 61% are “actively following DeFi” in order to learn up.
50% of the DLT work going on today with dematerialized securities is in the post-trade segment of the asset lifecycle.
40% of DLT projects today are between only 2 ecosystem members, 49% with 2-10 and 11% with 11 or more.
53% of DLT usage cases are for commercial deployment in 2022.
25% of banks and FMIs blockchain projects likely to use public blockchain vs. 48% of brokers’ and investors’ projects.
Northern Trust -
Report: “Mega Trends That Are Accelerating Change in Institutional Investing”
Authors: Northern Trust
Published: May 2022
Report Type: Whitepaper
“While many trends are shaping the future for institutional investing, three key factors have significant implications for investment managers. The continued growth of alternative and digital assets, an increased focus on achieving cost efficiencies and the influence of data science to shape decision-making will all be important in the coming year,” say Chapman, Pickett and Paulin.
The asset allocation by global institutional investors to real estate, private equity, and infrastructure in the 20-year period has moved from about 7% to above 26%, according to the Thinking Ahead Institute Global Pension Assets Study 2021
Seven in ten institutional investors expect to buy or invest in digital assets in the future, and more than 90% of those interested in digital assets expect to have an allocation in their institution’s or client’s portfolio within the next five years, according to Fidelity Digital Assets 2021 Institutional Investor Digital Assets Study.
Within the alternatives sphere, it is private assets that are seeing the most significant growth, expected to have hit $8 trillion at the end of last year, with investors looking at everything from private equity to private debt, real estate and infrastructure, and from ESG-aligned investments to sustainability-focused and impact investments.
The growth of alternative and digital assets is reshaping the competitive landscape for investment managers. Managers who have lost market share to alternative players will need to look at their value proposition, while those who fail to embrace digital assets may struggle to compete, not only with their current peers, but with new entrants in the future.
Institutional investors across the globe are also consolidating assets in an effort to build scalability, negotiating power, and economies of scale.
57% of respondents in a 2021 Northern Trust Survey said their data strategy included leveraging a central platform for investment data consolidation.
5% = the decrease average revenue margins of traditional asset managers between 2015 and 2020, according to Oliver Wyman.
BNY Mellon & Celent -
Report: “Migration to Digital Assets Accelerates”
Authors: CELENT, commissioned by BNY Mellon
Published: October 2022
Report Type: Survey
Survey Size: 271
Survey Participants: Institutional Investors
“97% [of survey participants] agree that “tokenization will revolutionize asset management”
Most important tokenization benefits are access to new or non-standard asset classes and the immutability and transparency of data. Other benefits include increased liquidity and reduced friction (e.g., faster settlement). Support for fractional ownership and lower costs via tokenization were rated least important.
Singapore and Hong Kong lead in terms of current investing in/exploring tokenized assets, with 75% of investor firms in the region stating they are currently exploring or investing in tokenized assets, compared to 60% in brazil, 53% in uk, 49% in the u.s and 48% in europe.
Benefits of tokenization include removing friction from transfer of value (84%) and increasing access for mass affluent and retail investors (86%)
Private equity and hedge funds are the assets investors would most like to see tokenized.
72% would like an integrated provider for all digital asset needs.
91% agree that tokenization will revolutionize asset management.
63% only comfortable trading tokenized assets with highly rated institutions.
70% are willing to pay extra for increased liquidity and faster asset turnover.
Boston Consulting Group (BCG) & ADDX -
Report: “Relevance of on-chain asset tokenization in ‘crypto winter’”
Authors: Sumit Kumar, Rajaram Suresh, Darius Liu, Bernhard Kronfellner and Aaditya Kaul
Published: August 2022
Report Type: Analyst Report
Tokenization of global illiquid assets estimated to be a $16 Trillion business opportunity by 2030.
On-chain asset tokenization helps reimagine the end-to-end process of finding and matching investors with investment opportunities, and the subsequent secondary market opportunities once an investment has been made.
There is an impending shift from traditional fractionalization to on-chain tokenization, which expands the scope of asset classes, stakeholder groups and regulatory scope for tokenization.
On-chain asset tokenization offers six distinct advantages over traditional fractionalization: 1) Improves affordability, enables borderless accessibility, 2) unlocks liquidity and 3) enhances flexibility, 4) enforces immutable transparency and accountability, 5) streamlines transaction efficiency, and 6) ensures better price discovery.
Some risks exist which need to be mitigated to scale up blockchain-based asset tokenization, such as increased regulatory scrutiny, geographical variance and associated uncertainty in governance [that] could lengthen runway for scaling tokenization across borders, lack of concerted programs to improve the nascent investor awareness and adoption, room for technology associated with tokenization stack layers to mature and only a gradual acceptance of tokenized assets from investors.
10% of global GDP that will be tokenized market by 2030.
$5.6b = the projected value of the on-chain asset tokenization market by 2026.
$150b+ = the trading volume of digital assets as of 2021, up from ~$30b in 2020.
Onyx by J.P. Morgan, DBS, Oliver Wyman Forum, SBI Digital Asset Holdings -
Report: “Institutional DeFi: The Next Generation of Finance”
Authors: Onyx by J.P. Morgan, DBS, Oliver Wyman Forum, SBI Digital Asset Holdings
Published: November 2022
Report Type: Whitepaper
Digital Asset Project(s): J.P. Morgan Onyx intraday repo solution, Project Guardian (MAS)
“The rapid evolution of blockchain technology and the potential disruption it can bring requires institutions to get ahead of the curve to avoid being left behind.”
The cost savings and new business opportunities of creating a “tokenized” version of real-world assets for transacting through DeFi protocols could be significant for issuers and investors, as well as for financial institutions that can adapt their technology and business models.
Tokenization can reduce settlement risk and decrease settlement times…by enabling so-called “atomic” settlement – the instant exchange of two assets on the condition that assets are simultaneously transferred.
The application of smart contracts in asset tokenization also has delivered a number of benefits, including enhanced and new offerings. For example, J.P. Morgan leverages tokenization to offer intra-day repo solutions for clients on its Onyx Digital Assets platform, and DBS Digital Exchange offers corporates a platform to raise capital through the digitization of their securities and assets, with options to offer smaller denominations.
Safeguards are the key to Institutional DeFi. Safeguards needed to build DeFi-based solutions for institutions include: AML/KYC Risk Controls, Data Privacy, Cybersecurity Protections, Mature Governance and conduct Models, Proper Resource Mechanisms, and Legal clarity around smart contract based business activity.
$50b = the value of DeFi as of October 2022.
$430b in transactions processed by J.P. Morgan’s intraday repo application on Onyx Digital Assets since Nov. 2020.
90% of Central Banks that were investigating the potential of CBDCs.
26% of Central Banks that were actively developing CBDCs and running pilot projects.
Boston Consulting Group (BCG) & JPMorgan -
Report: “The Future of Distributed Ledger Technology in Capital Markets”
Authors: BCG: Sukand Ramachandran & Steven Kok; J.P. Morgan: Scott Lucas, Allesandro, Michael Jenner
Published: 2022
Report Type: Analyst Report
Digital Asset Project(s): J.P. Morgan’s Onyx Digital Assets Repo. Project
“Capital markets have always driven towards efficiency; the deployment of blockchain technology is just another step in the continuing evolution of the market. We believe that in the current phase of market evolution, blockchain technology is playing a growing role, and it will continue to, becoming a fundamental component of capital markets.” -Scott Lucas, Head of Markets DLT, J.P. Morgan
“Through the securities lifecycle, there are pain points that currently inhibit capital markets efficiency and prevent innovation and growth. These include siloed data structures, large numbers of agents, and entrenched manual processes.”
“While technological change such as electronification has taken capital markets to new levels of efficiency, DLT can go further—offering cost, liquidity, transparency, and innovation benefits. From securities issuance, to trading, clearing, settlement, and securities servicing, DLT’s unique characteristics have the potential to enhance processes across the securities lifecycle.”
“Recognition of the potential benefits of natively issued digital assets has prompted fintechs, banks, and other market participants to embrace DLT partnerships to develop solutions. To realize DLT’s full potential and achieve widespread adoption, DLT platforms must achieve the depth and scale of traditional platforms and meet the needs of issuers and investors.
Market participants have concerns about DLT that include: cybersecurity, risk of fraud, interruptions to network and asset loss, inadequate liquidity, the need for clear regulatory frameworks, and data privacy.”
“We expect the impact will be greatest in asset classes that are either less mature, less digitized, or less efficient. For example, we see much more of a functionality uplift in the $41 trillion corporate bond market, as well as in syndicated loans and securitized products.
J.P. Morgan has utilised its in-house blockchain platform Onyx Digital Assets to facilitate repo transactions and accelerate their settlement. The platform enables repo transactions to be traded, settled and matured within a day, facilitating real-time transfer of cash and collateral and reducing settlement risk for clients.
2021 Reports
KPMG -
Report: “Digitization: 2022 Banking Industry Survey”
Note: This summary slide is reflective of the Digitization & Digital Assets/Crypto Services, and Cybersecurity Sections of this report.*
Authors: KPMG’s: Peter Torrente, Mark Price, Ken Kim, Tim Mahedy, Dylan Roberts, Celeste Diana, Matt Miller, Robert Sledge, David Pessah, Timothy Johnson, Alysha Horsley, Amy Matsuo
Published: May 2022
Report Type: Survey
Survey Size: 100
Survey Participants: Senior Executives
KPMG audit partner Robert Sledge suggests that “banks that stay on the sidelines when it comes to crypto assets and other digital assets may be missing an important moment—so long as they enter the area with a carefully planned strategy.’’
64% said their banks’ customer-facing processes are mostly or fully digitized. 18% said they were not digitized at all or only have some digitized customer-facing processes.
50% said that their back-office processes are mostly or fully digitized.
25% said those processes were not at all digitized or only barely digitized.
In terms of customer-facing processes, 18% said they either were only somewhat digitized—or they were unsure. Regarding back-office processes, 26% said they either were only somewhat digitized—or they were unsure.
81% of bankers in the survey said they expect to see an increase in cybersecurity threats, yet 34% indicate their bank is not investing enough in cybersecurity protection.
While 43% admitted their banks may be ill-equipped to protect customer data, privacy, and assets in the event of a cyberattack, only 47% said their bank is investing more heavily in cybersecurity as a result of the Russia-Ukraine war
The 2022 KPMG Banking Industry Survey Respondents reported their bank is currently offering or planning to offer the following products:
92% Blockchain processes to customers.
85% Digital Wallets.
39% NFTs.
18% Crypto trading.
15% Crypto bank accounts.
Deloitte -
Report: “Deloitte’s 2021 Global Blockchain Survey”
Authors: Deloitte US Blockchain and Digital Assets: Linda Pawczuk, Richard Walker, and Claudina Castro Tanco
Published: 2021
Report Type: Survey
Survey Size: 1,280
Survey Participants: Senior Executives and Practitioners in the Financial Services Industry across 10 locations: Brazil, China Mainland, Germany, Hong Kong, SAR, Japan, Singapore, South Africa, UAE, UK, and the US.
“More than three quarters of FSI [Financial Services Industry] respondents strongly or somewhat agree that their organization will lose an opportunity for competitive advantage if they fail to adopt blockchain and digital assets.”
Blockchain is driving change in the holistic financial ecosystem, from deposit taking to payments, lending, investing, and trading anything of value. The very nature of financial instruments, from money to stocks, and the infrastructure for any type of transaction is changing—for the better.
Digital assets are a driving force behind the next phase of this evolution, which will be a radical and welcome upgrade from the fragmented, batch cycle, brittle nature of financial products and infrastructure that currently exist.
There is consensus among our [Deloitte’s] cohorts that digital assets will replace fiat currencies in the next five to 10 years. More than three-quarters of overall respondents and FSI respondents (76%) believe the changeover will occur
Approximately 6 in 10 overall survey respondents identified regulatory barriers among the biggest obstacles to acceptance of digital assets.
Overall survey respondents expect to see significant positive impact on their organizations or projects from a variety of digital asset types: Stablecoins or central bank digital currencies (42%), Algorithm-driven stablecoins (38%), Enterprise-controlled coins (33%)
81% of respondents agree that blockchain technology is broadly scalable and has achieved mainstream adoption.
45% of respondents said that custody represented a “very important” role for digital assets in their respective organizations, ranking as the top role.
71% of respondents said that cybersecurity is the biggest obstacle to the acceptance & use of digital assets globally, followed by 63% citing regulatory barriers as the biggest.
44% of respondents said that digital assets will have a “significantly positive” impact for more efficient processes (e.g. faster payments) as well as greater compliance and transparency.
Any Questions?
Send an email to info@vertalo.com and visit our website, vertalo.com
 | A guest post by
|