Is tokenisation a solution looking for a problem?

By Liz Towler, Founder and CEO, Flowryd

I’ve heard the same line about tokenisation for over a decade: it’s a solution looking for a problem. And I’ll be honest — for a long stretch, that was fair.

Not any more. Big shifts are happening and new markets are forming. But we still have a usability problem — and to solve it we have to get back to the first principles of what makes a market work.

The early years were blockchain theatre. We tokenised a building, a painting, a single asset — a good way to test the technology. Then came the pilots that built out the operational workflows across participants, from fund issuers to custodians to transfer agents, to bring assets on-chain. Plenty of issuance, good headlines — but limited market activity beyond the first trades. Assets sat idle, or were traded back into traditional venues.

The difficulty — and the payoff — is the coordination, and it isn’t the part that earns headlines. It’s the shift of the wholesale assets that underpin global markets: the ability to move high-quality assets as collateral, and pay for the trades, on time, to the right place, 24/7 — while opening the market to a new generation of innovators and investors.

Why does this matter? Because this technology can solve the risks we’ve learned to live with — settlement that takes days and leaves counterparties exposed, capital pre-funded and left idle just in case, collateral that can’t move once the trading day closes. That’s the daily cost of plumbing built for a slower, regional world of fixed trading hours. Done right, tokenisation takes settlement, funding and timing risk out at the source, instead of managing around them.

That’s the first principle to hold onto. A market works when it has three things: deep, reliable liquidity; trust that the rules hold and the asset is what it says it is; and control — investor protection and systemic safety. That’s IOSCO’s framing, and it’s the right one. Tokenisation earns its place only where it strengthens all three — not where it trades them away for speed.

Scale has arrived

The clearest sign tokenisation is no longer a sideshow: the systemic core of the market is moving onchain. Follow the government-quality assets and you’ll see where — and how big.

In the US, DTCC has made around $30 trillion of assets available to tokenise — equities, ETFs and Treasuries, one-to-one, settling 24/7. In the UK, the Bank of England has just approved a world-first link between HSBC’s and LSEG’s digital depositories for DIGIT, the first digitally native gilt — two platforms, one gilt, interoperable. In Japan, the Bank of Japan and JASDEC are bringing tokenised JGBs and onchain repo live through Progmat. In Korea, KSD is standing up the depository for a full tokenised securities market by 2027. And Hong Kong has now issued four government digital green bonds, the latest around HK$20 billion — the world’s largest — settling with tokenised deposits.

What’s being built around these assets is a stack of use cases: collateral mobility first — posting as margin, moving intraday — then repo and securities lending against those assets, then the FX and funding markets that trade against them. The highest-quality collateral comes onchain, and the markets that depend on it follow.

We’re starting to see the world’s highest-quality assets come on-chain — government debt, Treasuries, the collateral that underpins everything else. And just as we saw with the internet, the digitisation of finance is rebalancing the field. New entrants are connecting, clearing and creating products never before possible. Value shifts to whoever makes those assets useful — in the venues that offer the best terms of trade. That’s the opportunity: not digitising the old market, but opening it.

Where it’s actually working

The projects making a measurable difference today aren’t inventing new markets. They’re taking an existing flow — repo, collateral, margin — and removing a funding or timing cost. The shift is intraday: collateral that took a full day to move in traditional markets can now move in minutes, unbound by market cut-offs.

Take a concrete example. Uber’s treasury, working with HSBC and Franklin Templeton, bought into a tokenised money-market fund using tokenised deposits — in on a Thursday, out on a Sunday, settled atomically — and captured an extra day and a half of yield that the weekend cut-off would otherwise have killed. That’s not a pilot looking for a use case. That’s time, cost and risk, improved, on a flow a treasurer runs every week.

And it’s becoming repeatable, because the industry is doing the unglamorous coordination work. The GDF–ISDA US Tokenised Money Market Fund Working Group ran a live sandbox on exactly this: real institutional margin workflows on tokenised rails. The result was tokenised money-market funds pledged as variation margin, settling in under two minutes, moving across different custodians and chains — inside the systems institutions already use, not around them. It builds on earlier groundwork on using money-market funds as collateral.

That’s the difference between 2017 and now: not a demo, a convergence of the best of traditional and decentralised worlds. TradFi brings the scale, the trust and the frameworks; open finance unlocks access, innovation and new growth.

The catch: a usability problem

So if tokenisation has found its problem, what’s the catch? Start with a number: only a fraction of the world’s assets are on-chain — around $30 billion out of more than $300 trillion. The feasibility question is answered; the technology works. What’s unsolved now is usability — and too much of the industry is still solving for the tech, not the customer. We must refocus on the client, not on one chain or intermediary over another. Otherwise we risk taking today’s fragmented market and faithfully recreating it, digitally — or worse.

We’ve seen how this resolves before. ARPANET carried its first message in 1969 and ran for over thirteen years as a clever network for a handful of institutions. What turned it into the internet wasn’t faster cables or more nodes — it was a shared protocol: on 1 January 1983, disparate networks adopted TCP/IP and started speaking the same language. The technology had worked for a decade; the standard is what unlocked the scale. Tokenisation is at that moment now.

This is the convergence imperative, and the industry has already named it. GDF, the FIX Trading Community and Deloitte set it out this year, drawing on 36 senior market participants: legacy and tokenised infrastructure will coexist, and getting there takes deliberate coordination — common standards, a trusted digital cash leg, and the governance to hold it to account, not one network winning. That’s the work: a shared layer so an asset stays legible across venues, and the parties who hold the obligations — to the asset and to the end investor — carrying them across the whole lifecycle.

Progress is real — but let’s hold the tension. The industry is still at risk of solving its own problem instead of the client’s. When a platform wraps an issuer’s asset and hands the end investor a synthetic claim, stripping the rights that came with the real thing, that isn’t progress — it’s the old extraction in new packaging. We still have a way to go.

So come back to first principles. This was never about the intermediaries, the networks, or the tech. It’s about the market — buyers, sellers, and the creators of new value. Fragmentation and interoperability will get solved; engineers are good at that. What won’t solve itself is whether we build this for the people the market is meant to serve.

Because for many of us, this was never about a new asset class or a retail revolution — it was about making finance better, safer, and open to all.