Financial Market Infrastructure Using Blockchain

Financial market infrastructure blockchain refers to the use of distributed ledger technology across the systems that transfer money, settle securities, manage collateral and record financial transactions. For financial institutions, asset managers and investors, the key development is not the replacement of traditional finance, but the integration of blockchain with regulated market infrastructure.

Key Takeaways

• Financial market infrastructure includes payment systems, central securities depositories, securities settlement systems, central counterparties and trade repositories.

• Blockchain can synchronize records, automate settlement and collateral processes through smart contracts, and reduce some reconciliation between institutions.

• J.P. Morgan's Kinexys already supports near-real-time blockchain settlement, tokenized collateral and delivery-versus-payment workflows.

• BCG and Ripple project tokenized real-world assets could reach $18.9 trillion by 2033, while industry estimates cited by PwC put tokenized fund AUM at $235 billion by 2029.

• Interoperability, regulatory clarity, privacy, cybersecurity risks and governance remain major constraints on mainstream adoption.

Where Blockchain Fits Across Financial Market Infrastructure

The CPMI-IOSCO framework defines financial market infrastructures as systems that facilitate clearing, settlement and recording of financial transactions. Settlement finality remains essential whether transactions occur on conventional infrastructure or a distributed ledger.

This layer-by-layer structure distinguishes FMI adoption from broader asset tokenization. Real world assets, money market funds, private credit and other financial instruments create demand for blockchain infrastructure, but FMI determines how those assets are transferred, settled and recorded.

Payments and Settlement on Shared Ledgers

Blockchain can combine payment, settlement and reconciliation within a shared network, reducing the need to synchronize multiple independent databases.

Traditional financial markets frequently separate messaging, clearing, reconciliation and final settlement. Distributed ledger technology can give authorized parties a synchronized transaction state, while smart contracts execute predefined conditions.

J.P. Morgan's Kinexys Digital Financing illustrates this model. The platform tokenizes cash and collateral for intraday repo transactions and supports near-real-time settlement. Delivery versus payment enables near-simultaneous transfer of cash and collateral ownership, while programmable settlement terms reduce manual operational steps.

J.P. Morgan reports that one financial institution using Digital Financing achieved a 56% decrease in its borrowing rate compared with its traditional intraday credit arrangement, as well as near-instantaneous DvP and near-zero-touch settlement operations. This is better supported than broad claims that blockchain universally reduces settlement times by more than 90%.

Collateral Management and Asset Servicing

Blockchain is also being applied to collateral management, where financial institutions need to identify, transfer and release eligible assets efficiently.

The Kinexys Tokenized Collateral Network allows collateral ownership to move without requiring the underlying financial assets to move across their original ledgers. Its initial applications include money market funds, with near-real-time transfers and automated reconciliation.

That structure can support intraday liquidity and margin calls while assets remain invested. Similar blockchain-based workflows may eventually include bonds, funds and other securities.

Smart contracts can also automate parts of asset servicing, including predefined corporate actions, transfer restrictions and regulatory reporting. Transfer agents, custodians and asset managers still remain relevant because legal ownership, client protection and regulatory compliance cannot be delegated to code alone.

Tokenised Assets Increase Demand for FMI

Asset tokenization increases the need for reliable issuance, custody, trading and settlement infrastructure rather than eliminating it.

BCG and Ripple projected in 2025 that tokenized real-world assets could grow from about $0.6 trillion to $18.9 trillion by 2033. The estimate includes a wide range of financial and real assets and is a market projection, not the current value of assets recorded on public blockchains.

Tokenized funds are one subset of that market. PwC Switzerland cites industry estimates that tokenized fund assets under management could reach $235 billion by 2029 and notes that tokenization can support process automation, controlled transferability and digital distribution without changing a fund's underlying legal structure.

These figures matter to FMI because continued growth in tokenised assets increases the need for interoperable custody, settlement money, collateral and asset-servicing systems.

Broader institutional investment is also increasing: Goldman Sachs reported $15.8 billion of digital asset M&A volume in 2024, up from $1 billion in 2019, based on PitchBook data.

Interoperability Is the Main Infrastructure Challenge

Blockchain can create new silos if different networks, financial assets and payment systems cannot communicate.

Public blockchains provide broad connectivity and network effects, while private blockchains and permissioned ledgers can give institutions greater control over transaction visibility, participant identity and compliance. Privacy concerns make permissioning especially important when transactions reveal client positions or trading activity.

Neither structure guarantees interoperability.

An asset recorded on one distributed ledger may still need payment from another network, custody through a legacy system and reporting through separate infrastructure. The Canton Network represents one approach to connecting institutional applications while preserving selective privacy.

This differs from broader shared-ledger concepts such as the Global Layer 1 model, which focuses on common infrastructure for issuance, trading, settlement, custody, asset servicing and payments.

Regulation Is Evolving With Blockchain Infrastructure

Blockchain-based FMI still operates inside securities, banking, anti-money laundering and market-infrastructure laws.

Switzerland's DLT legal framework has been fully effective since August 2021 and supports ledger-based securities and licensed DLT trading facilities. FINMA licensed BX Digital as Switzerland's first DLT trading facility in 2025.

The European Union's DLT Pilot Regime permits authorized infrastructure to test tokenised shares, bonds and certain fund instruments under targeted exemptions. Following limited initial uptake, ESMA recommended making the regime more flexible and potentially permanent, while the European Commission has proposed extending its duration and scope. These changes should therefore be described as proposed rather than already effective.

Stablecoins can also function as settlement assets. In the United States, the GENIUS Act created a federal framework for payment stablecoins, adding regulatory structure to one potential form of blockchain-based settlement money.

Conclusion

Financial market infrastructure is adopting blockchain most clearly where shared records, programmable settlement and collateral mobility can improve existing operations. Payments, securities settlement, collateral management and transaction records are increasingly being integrated with distributed ledgers rather than moved wholesale away from regulated financial services.

The technology's long-term value will depend less on raw transaction speed than on interoperability, legal finality, liquidity, privacy, governance and regulatory compliance across global finance.