Blab Crypto
Tokenizations Real-World Hurdles: Why Banks Still Lag Behind Cryptos Settlement Speed
Ophelia Snyder, a former co‑founder of the crypto‑asset platform 21Shares, says the gap between traditional finance and blockchain isn’t a matter of technology, but of how the two systems can coexist.
Snyder points out that tokenization promises faster settlement rails and more efficient asset movement. The real obstacle, however, lies in weaving blockchain‑based assets into the books, records, compliance workflows, and regulatory reporting systems that banks, brokerages, and asset managers already rely on. She notes that most conversations focus on transaction throughput while overlooking the operational steps that follow a trade and precede full settlement.
According to reports, questions linger about how tokenized assets fit into existing accounting systems, how they are reconciled, and how they are reported to regulators. Financial institutions must also rethink risk‑management frameworks when tokenized assets can trade around the clock. Many firms depend on third‑party software providers that have yet to adapt their systems for blockchain‑native transactions.
Snyder argues that the industry’s biggest challenge is scale, not functionality. A tokenization project can work at a limited scale yet still struggle to support the volume of U.S. capital markets. Moving large amounts of digital bearer assets on behalf of clients demands far more oversight and controls than current book‑entry systems provide.
To tackle these issues, Snyder outlined two primary paths. One is for financial institutions to develop entirely new software that integrates blockchain infrastructure with existing controls. The other is for existing software providers to adapt their products to support new transaction methods. Both approaches would require lengthy implementation timelines, especially as many institutions are still finishing cloud‑migration efforts.
Snyder expects the industry’s toughest challenges to surface as institutions move beyond pilot programs. The next phase will test whether tokenized infrastructure can operate in the critical path of major financial firms. She says the timeline hinges largely on how aggressively institutions pursue adoption. If current momentum continues, Snyder anticipates more meaningful implementation efforts over the next several years.
While tokenization gains traction in niche pilots, broader adoption will hinge on embedding blockchain assets into the day‑to‑day operations of legacy financial systems. Until banks, custodians, and clearinghouses can reconcile tokenized holdings with their existing ledgers and regulatory reporting obligations, the promise of instant settlement and lower counterparty risk will remain largely theoretical.
In related market activity, May’s combined exchange volumes fell 3.45% to $4.41 trillion, the lowest level since September 2024. At the same time, real‑world asset (RWA) perpetual futures volumes rose 10.4% and hit a new all‑time high, underscoring that while overall trading activity may be softening, certain tokenized products are still attracting significant interest.
The coming months will test whether the infrastructure can scale to meet the demands of institutional investors and regulatory bodies. The outcome will shape the next wave of fintech innovation and determine whether tokenization can move beyond pilots into mainstream financial markets.
Snyder points out that tokenization promises faster settlement rails and more efficient asset movement. The real obstacle, however, lies in weaving blockchain‑based assets into the books, records, compliance workflows, and regulatory reporting systems that banks, brokerages, and asset managers already rely on. She notes that most conversations focus on transaction throughput while overlooking the operational steps that follow a trade and precede full settlement.
According to reports, questions linger about how tokenized assets fit into existing accounting systems, how they are reconciled, and how they are reported to regulators. Financial institutions must also rethink risk‑management frameworks when tokenized assets can trade around the clock. Many firms depend on third‑party software providers that have yet to adapt their systems for blockchain‑native transactions.
Snyder argues that the industry’s biggest challenge is scale, not functionality. A tokenization project can work at a limited scale yet still struggle to support the volume of U.S. capital markets. Moving large amounts of digital bearer assets on behalf of clients demands far more oversight and controls than current book‑entry systems provide.
To tackle these issues, Snyder outlined two primary paths. One is for financial institutions to develop entirely new software that integrates blockchain infrastructure with existing controls. The other is for existing software providers to adapt their products to support new transaction methods. Both approaches would require lengthy implementation timelines, especially as many institutions are still finishing cloud‑migration efforts.
Snyder expects the industry’s toughest challenges to surface as institutions move beyond pilot programs. The next phase will test whether tokenized infrastructure can operate in the critical path of major financial firms. She says the timeline hinges largely on how aggressively institutions pursue adoption. If current momentum continues, Snyder anticipates more meaningful implementation efforts over the next several years.
While tokenization gains traction in niche pilots, broader adoption will hinge on embedding blockchain assets into the day‑to‑day operations of legacy financial systems. Until banks, custodians, and clearinghouses can reconcile tokenized holdings with their existing ledgers and regulatory reporting obligations, the promise of instant settlement and lower counterparty risk will remain largely theoretical.
In related market activity, May’s combined exchange volumes fell 3.45% to $4.41 trillion, the lowest level since September 2024. At the same time, real‑world asset (RWA) perpetual futures volumes rose 10.4% and hit a new all‑time high, underscoring that while overall trading activity may be softening, certain tokenized products are still attracting significant interest.
The coming months will test whether the infrastructure can scale to meet the demands of institutional investors and regulatory bodies. The outcome will shape the next wave of fintech innovation and determine whether tokenization can move beyond pilots into mainstream financial markets.
