How Tokenization is Changing Capital Markets

Innovation in capital markets is continuing at a rapid pace. Just as the transition from T+5 to T+2 settlement revolutionized traditional finance (TradFi), a new wave is surging with tokenization. For some market participants, the buzz around blockchain, digital bonds, and decentralized finance (DeFi), may sound like a solution searching for a problem. Yet, in the latest episode of “A Capital Markets Conversation” we reveal how this technology is quietly solving real challenges and unlocking new opportunities for issuers, investors, and institutions.

Tokenization: Cutting Through the Jargon

Tokenization isn’t just another buzzword - it’s a fundamental shift in how assets are represented and managed. As Nupur Singh explains, distributed ledger technology (DLT) is the backbone, blockchain is a type of DLT, and tokenization is the method for creating digital representations of real-world assets. Digital bonds, for example, can be either native (issued directly on blockchain) or tokenized (traditional bonds recorded on chain but issued off chain). This hierarchy clarifies the landscape: “DLT is the infrastructure, tokenization is the method, and digital bonds are the regulated financial product created using that method.”

Efficiency Gains: Beyond Faster Settlement

Skeptics often ask why tokenization matters when current settlement systems already handle billions of dollars daily. The answer lies in operational efficiency. Digital bond platforms leverage enterprise-grade DLTs, not energy-hungry blockchains. The result? Settlement can be instant i.e. T+0 and lifecycle events like corporate actions can be programmed upfront. Nupur notes, “DLT adds a bit of compute, but eliminates a lot of operational drag.” The incremental compute cost is dwarfed by the savings in market plumbing, making the process leaner and smarter.

Transparency and Risk Management: A Home Run for Private Markets

Tokenization isn’t just about speed, it’s also about transparency and risk reduction. Failed trades, which could linger for weeks or months in traditional systems, become a relic when every transaction is time-stamped and visible on a distributed ledger. In private markets, this is transformative: strict permissioning ensures only authorized participants see sensitive deal data, reducing risk and improving compliance. Chris Fenske highlights, “Deals are being created as we record this session that we may never know about. There’s a lot of risk that could potentially be building up that it’s hard to actually track.” Tokenization offers a solution that’s tailor-made for these hidden markets.

Scaling and Innovation: Blockchain Is Evolving Fast

The blockchain of today is not the blockchain of tomorrow. As Carl James reminds us, “The technology will continue to innovate and scale, just as financial protocols have evolved to handle increasing complexity.” Permissioned blockchains run by regulated institutions offer the right balance of distribution and governance. Nupur explains, “You typically have 5 to 50 nodes, not thousands, and only approved institutions can run these nodes.” This flexibility means tokenization can adapt to different use cases, from private markets to large-scale public market applications.

Real-World Adoption: Tokenization Is Happening Now

Proof of concept tokenization is moving into production. In 2025 alone, there have been more than 18 digital bond issuances in public markets, all investment grade. Large asset managers and major U.S. banks are already tokenizing money market funds. The question has shifted from “if” to “how do we scale?” As the line between public and private markets blurs, tokenization enables fractional ownership and easier portfolio diversification.