Industry
Banking
Banking Services Transformation: Unlocking Exponential Value
Highlights
- Digital assets and tokenisation are gaining real-world scale and adoption, prompting banks to define their role in the emerging digital assets ecosystem.
- Banks and other regulated financial institutions can play four roles – from issuer services and custody to direct issuance and innovation partnerships – monetising trust, compliance, and infrastructure capabilities while managing risk and shaping the future of tokenised finance.
- Enterprise blockchain failed to scale because it lacked compelling economics. Public blockchains offered liquidity and programmability but introduced unignorable risks. This creates a compelling opportunity for banks to become the trusted backbone of the digital assets ecosystem.
On this page
On this pageinpage
The current state of tokenisation and digital assets
Digital assets and tokenisation have moved beyond experimentation into a more mature phase. Crypto assets have weathered several market cycles, public blockchains continue to host material transaction activity, and stablecoins have emerged as the blockchain-native financial product with mainstream relevance. DefiLlama estimated total stablecoin market capitalisation at approximately US$301 billion. While adoption remains global, India and the United States ranked as the leading markets in Chainalysis’ 2025 Global Crypto Adoption Index.
Tokenisation is also moving beyond proof-of-concept into real-world deployment for selected asset classes. Since its launch in 2024, BlackRock's BUIDL fund has become one of the world's largest tokenised money market funds, expanding beyond Ethereum to multiple public blockchain networks. Franklin Templeton’s BENJI is the first US-registered money market fund to use a public blockchain as its system of record.
Adoption is expanding across asset classes: tokenised gold products such as PAXG and XAUt demonstrate the commodity use case; platforms such as Kraken xStocks and Robinhood’s EU stock-token initiative are about equity tokenisation; and Lofty illustrates fractional real-estate tokenisation (though real estate remains legally and operationally more complex).
Yet regulated financial institutions remain largely peripheral to the digital assets ecosystem. Much of the activity has been led by crypto-native firms, fintechs, stablecoin issuers, asset managers, blockchain foundations, and new market infrastructure providers. Banks have participated in a limited manner through custody, reserve management, pilots, and selective tokenisation platforms, but they have not yet become the dominant infrastructure providers for digital assets. The strategic question is no longer whether tokenisation will exist, but where and how banks and other regulated institutions can participate safely, profitably, and at scale, in the emerging landscape.
The dilemma: Enterprise blockchain can’t scale, public blockchain can’t be controlled
The limits of enterprise blockchain
The first generation of enterprise blockchain promised shared ledgers for banks, exchanges, insurers, trade-finance participants, and logistics firms. The promise was attractive: fewer reconciliations, common records, automated workflows, and lower post-trade or operational friction. In practice however, many initiatives struggled because they recreated existing workflows without generating enough incremental value. Participants had to agree on governance, privacy models, standards, budgets, liability, integration with legacy systems, and the economics of a shared platform among competitors.
Several projects based on enterprise blockchain like ASX CHESS replacement, B3i in insurance, TradeLens, we.trade have failed to materialise due to the above complexities.
This does not signal the end of institutional distributed ledger technology, but highlights a key lesson: closed enterprise blockchain models fail when they lack liquidity, network effects, and a business case that cannot be served efficiently by existing systems, APIs, or market utilities.
Public blockchains have demonstrated real adoption
Public blockchains solve a different problem. They provide open access, global liquidity, programmability, and composability. Stablecoins are the strongest example. They enable always-on, programmable transfer of dollar-like value across public networks. The volume and momentum of public-chain activity make it impossible for mainstream financial institutions to ignore.
However, tokenisation is not uniform across asset classes. Stablecoins, tokenised treasuries, money-market funds, and gold have gained the strongest traction because they are relatively straightforward to price, custody, redeem, and audit. Tokenised equities and real estate are promising but still in infancy, mostly due to liquidity, complexity, and regulations related challenges. The takeaway: public blockchains have demonstrated product-market fit, but not every tokenised asset class is equally mature.
The dilemma for banks
Banks therefore face twin challenges. While demonstrating the value in enterprise blockchains is problematic, deploying a secure and compliant business model is challenging in the case of public blockchains. Banks have limited control over public blockchains, unlike traditional banking and payment infrastructure.
On public blockchains, banks do not fully control validators, protocol governance, smart contracts, forks, gas fees, wallet behaviour, transaction sequencing, sanctions exposure, or chain-level operational incidents. These risks differ materially from traditional payment and settlement infrastructures where governance, access, and liability are more clearly defined.
Regulation is improving but remains fragmented. The EU’s MiCA framework has established uniform rules for many crypto-asset activities, the US GENIUS Act has introduced a framework for payment stablecoins, Hong Kong has introduced a licensing regime for fiat-referenced stablecoin issuers, and the Basel crypto asset standard came into effect in January 2026 for internationally-active banks. The Financial Stability Board has warned that gaps and inconsistencies across jurisdictions could create regulatory arbitrage and oversight challenges.
Four roles that regulated financial institutions can play
Digital asset issuer services
Issuer services are the most attractive near-term opportunity because they are an extension of what banks already excel at. Issuers of tokenised assets, such as stablecoin companies, asset managers, mutual funds, corporates, sovereigns, private funds, and tokenised security platforms, will require a range of services: reserve custody, cash management, trustee services, issuance infrastructure, transfer agency, investor onboarding, KYC-AML controls, redemption processing, lifecycle management, regulatory reporting, settlement, and asset servicing.
This role will allow banks to monetise trust, compliance, balance-sheet relationships, and operating scale, without immediately assuming the risks associated with issuing their own digital assets. For instance, Circle’s selection of BNY Mellon as a primary custodian for USDC reserves shows how stablecoin issuers still rely on regulated institutions for reserve management and credibility. Likewise, HSBC’s Orion platform shows how banks can support digital bonds, tokenised gold, and custody solutions through regulated digital-asset infrastructure.
Digital asset custody and investor services
Custody is the foundational capability in digital assets. Investors in crypto assets and tokenised assets need secure safekeeping, wallet infrastructure, key management, transaction controls, buy-sell access, payment connectivity, tax and reporting support, and asset servicing across multiple blockchains. BNY Mellon’s digital asset custody platform (launched initially for select US customers to hold and transfer bitcoin and ether) illustrates how traditional financial institutions are beginning to don this role.
Yet long-term differentiation will not come from safekeeping alone. While custody demands robust cyber resilience, private-key governance, asset segregation, chain monitoring, wallet controls, sanctions screening, smart-contract due diligence, and incident response, all this may become commoditised over time. The greater opportunity lies in embedding custody within a broader value proposition that includes trading access, tokenised fund administration, collateral mobility, lending, settlement, reporting, and issuer services.
Direct digital asset issuance
The third role is direct issuance: bank stablecoins, tokenised deposits, deposit tokens, or tokenised bank liabilities. This role offers a strategic upside because it positions banks closer to the settlement asset in tokenised markets. For instance, J.P. Morgan’s deposit token, made available to institutional clients on a public blockchain, is an example of how a large bank can experiment with bank-backed digital money.
It is worth noting though that direct issuance introduces some challenges too, especially around liquidity management, operational resilience, settlement finality, smart-contract risk, capital treatment, public-chain or hybrid-chain exposure, and reputational risk. It may also fragment liquidity if every bank issues its own tokenised deposit or stablecoin across different chains, wallets, and jurisdictions. This role is therefore more suitable for large banks with strong balance sheets, payment franchises with regulatory confidence, and institutions with the ability to generate network effects.
Innovation, infrastructure, CBDC, and public sector experimentation
The fourth role is disciplined participation in innovation and public sector infrastructure experiments. Banks should use innovation budgets to participate in tokenised deposits, wholesale settlement pilots, programmable payments, interoperability, public-permissioned networks, and central banks or BIS-led programs. Participating in initiatives led by organisations like BIS, Singapore Monetary Authority, UK Digital Pound, RBI digital rupee, and so on, will offer banks practical learning and the opportunity to participate in development of standards and regulations.
Strategic implications for banks
What banks need is a comprehensive tokenisation and digital assets strategy as opposed to isolated pilots. This strategy should define the role or combination of roles the institution is best positioned to execute successfully: issuer services, custody and investor services, direct issuance, and innovation-led infrastructure participation. It should also identify and clearly establish target client segments, asset classes, jurisdictions, and blockchain architectures.
In Figure 1, we list four focus areas and strategic objectives for financial institutions aiming to foray into the tokenisation space.
Figure 1: The four roles for regulated financial institutions in the digital assets ecosystem
Banks should prioritise the use cases where tokenisation delivers measurable value: new revenue pools, lower operating costs, improved collateral mobility, faster settlement, stronger client retention, better distribution, or access to new investor segments.
Investment decisions should be guided by business case, not technology enthusiasm.
The roadmap should be stage-gated. While near-term investments can focus on issuer services, reserve management, custody, and tokenised fund support, medium-term priorities could include asset servicing, collateral, settlement, and investor-access capabilities. Direct issuance should be considered selectively, where there is regulatory clarity, client demand, balance-sheet strength, and a credible liquidity model.
Innovation funding should be used judiciously – to participate in industry experiments, central-bank pilots, BIS initiatives, public-permissioned networks, and tokenised settlement infrastructure. These experiments may not generate immediate revenue, but will help banks shape standards, understand risks, build internal capability, and avoid being excluded from future financial-market infrastructure.
Realising the full value of tokenisation will require significant business, operational, and technology transformation. Key areas of focus include:
- Seamless integration of traditional systems with blockchain-based systems and ledgers
- Establishing a secure, robust, and scalable mechanism to manage private keys, which pose critical operational risks
- Redesign of processes like ledger maintenance, reconciliation, client reporting needs, and controls to support tokenised finance
- Evaluation of benefits and risks of early investments and scale across customers and products
Banks as the trust layer of the tokenised economy
Enterprise blockchain struggled because it often failed to create enough incremental value. Public blockchains, by contrast, have achieved adoption, liquidity, and programmability at scale, but they also present risks that regulated institutions cannot ignore. The opportunity for banks is not necessarily to become crypto-native companies, but to become the trusted service layer for the digital assets ecosystem. To that end, banks can play a strong role in issuer services, custody, compliance, asset servicing, regulated settlement, tokenised deposits, reserve management, and participation in public-sector infrastructure experiments.
Public blockchains may provide open rails for tokenised finance, but regulated financial institutions can provide the trust, compliance, servicing, and risk management needed to connect those rails to mainstream financial markets.