TL;DR
- Tokenization mirrors the internet’s evolution but must integrate with existing financial infrastructure.
- Success depends on embedded, compliant infrastructure, not just user-friendly interfaces.
- The goal is modernizing issuance and settlement, not creating a new asset class.
BlackRock CEO Larry Fink made a pointed comparison late last year in The Economist: tokenization of financial assets sits today roughly where the internet stood in 1996. Fink, who oversees more than $10 trillion in assets at the world’s largest asset manager, argued tokenization could advance at internet speed, with enormous growth over the coming decades. The statement places the creation of digital representations of financial instruments at the center of one of the most consequential shifts in global capital markets.
Before Netscape, Google, and AOL built accessible on-ramps to the web, the internet remained confined to academics and military researchers. Neither Netscape nor its peers redesigned the underlying technical architecture; they made a fragmented, complex system usable for ordinary people. TCP/IP and telecom infrastructure stayed invisible while books, music, and commerce migrated to digital formats accessible to anyone, anywhere.
Capital markets, however, do not work like the internet. They are identity-bound, legally enforceable, and tightly regulated systems built on decades of institutional infrastructure. Tokenization cannot simply sit on top of finance like a browser layer. It must operate within — and alongside — existing market infrastructure, connecting custodians, exchanges, transfer agents, and settlement systems. In practice, the distinction matters enormously.
The Hybrid Infrastructure Linking TradFi and DeFi
Builders working on tokenization infrastructure are moving toward hybrid architectures in which traditional institutions — exchanges, custodians, and depository banks — remain central but operate on shared digital platforms.
TradeWeb, Goldman Sachs, and BNP Paribas already play roles in its development, spanning governance and application creation. Digital Asset has spent more than a decade developing blockchain technology aimed at enabling real-time efficiencies and 24/7 global transactions across decentralized and traditional finance.
McKinsey frames the opportunity not as speculative technology adoption but as a multi-trillion-dollar efficiency gain, particularly in post-trade processes, collateral mobility, and cross-border transactions. The firm also notes that meaningful adoption will only occur when tokenization integrates with existing market infrastructure, rather than attempting to bypass it.
Publicly traded equities represent the hardest test case
Unlike private markets, where inefficiencies run deeper, listed securities are already liquid, relatively low-cost, and extensively regulated. The bar for improvement is high — yet inefficiencies persist. The American Depositary Receipt (ADR), introduced by J.P. Morgan in 1927, already functions in many ways as a proto-token: a tradable representation of a foreign share held in another market. Even so, settlement still runs in batch cycles, corporate actions remain fragmented across multiple intermediaries, and cross-border investing depends on structures that would look familiar to early 20th-century bankers.
The SEC and CFTC are coordinating gradual oversight harmonization, preserving core principles — regulated intermediaries, KYC requirements, and best-execution standards — while pursuing narrow pilot programs rather than broad exemptions.
Digital Securities Depositary Corporation uses KALYP technology to enable fully regulated tokenization of securities under direct SEC supervision, with interoperable distributed ledger technology (DLT) infrastructure serving as an orchestration rail across regulated capital market firms. Early regulatory engagement in tokenized equities has centered on ADR-style structures, and the pattern reflects a deliberate, incremental approach.
The companies that gain ground in tokenization over the medium term will not be those promising radical disruption. They will be the ones that embed themselves into the core infrastructure of financial markets.
Netscape did not replace TCP/IP; it made it usable. Tokenization will not replace capital markets — it will make them faster, more global, and better suited to the digital age. As Fink wrote, the analogy to the internet is useful, but the real prize goes to builders who work within the system, not around it.
