Here’s why Wall Street suddenly obsessed with tokenization – but on its own terms

Wall Street spent years talking about tokenization, but never seemed to move beyond vague plans and pilot projects. This week, however, we’ve seen a culmination of various efforts and incentives that showed it’s finally taking things seriously.

BMO said it plans to launch tokenized cash capabilities with CME Group and Google Cloud for real-time payments and round-the-clock margin activity. Nasdaq already has SEC approval to support trading and settlement of certain stocks and ETFs in tokenized form.

Earlier this month, US bank regulators said tokenized securities would not face extra capital charges simply because blockchain is involved.

And then, on March 25, the House Financial Services Committee held a full hearing on tokenization and said it was working on a draft legislation aimed at adapting securities rules to this new structure.

That cluster of events and their timing tells you where tokenization now sits in American finance. This is no longer a vaguely crypto-adjacent curiosity. It’s become a contest over how markets will function in the next decade, who gets to control the software layer beneath them, and whether the existing financial system can absorb digital finance without giving up its grip on the system.

Tokenization means taking an asset that already exists and representing it digitally on a blockchain-based ledger so it can move with more automation and fewer time constraints than the current architecture allows.

This makes assets easier to issue, easier to transfer, easier to use as collateral, and potentially faster to settle. In Larry Fink’s 2026 chairman’s letter, BlackRock described tokenization as a way to make investments easier to issue, trade, and access. JPMorgan’s Kinexys sells a similar future in institutional language: transactions that run 24/7, in near real time, across borders.

Finance wants internet hours

Tokenization means taking an asset that already exists and representing it digitally on a blockchain-based ledger so it can move with more automation and fewer time constraints than the current architecture allows.

The easiest way to understand Wall Street’s enthusiasm for tokenization is to stop looking at it as a push for blockchain technology. What most legacy financial firms want is trading continuity, which is an almost impossible thing to achieve using existing trading and settlement architecture.

Global markets already trade 24/7, so to speak, because oil trades when Wall Street sleeps, and futures reprice on headlines from Asia or the Middle East. Margin calls for commodities on the LSE happen despite what time it is in Chicago. But almost the entirety of the current financial system still relies on business hours, settlement windows, and slow back-office processes that weren’t built for the interconnected economy we now live in.

Tokenization offers a way to bring money, securities, and collateral closer to the speed at which modern markets actually live.

BMO said as much in its announcement. Its tokenized cash platform is meant to support institutional clients using margined products and derivatives at CME, allowing them to manage trading, settlement, and margin calls at any time. JPMorgan wants to do the same thing through Kinexys, which promises always-on payments and faster cross-border transfers. Citi has been pushing for the same in its work on tokenized payments, framing them as a way to create real-time liquidity, automation, and more efficient collateral usage.

All of these efforts are very real and will soon start producing tangible results (actual off-hours settlement). What we’re seeing now is way past the realm of abstract language on innovation. We’re now seeing practical language describing actual treasury management, funding, and collateral mobility.

Washington is now treating that prospect as a capital-markets issue.

The committee memorandum for the March 25 hearing said lawmakers would examine whether the current securities law adequately governs tokenized activity and where duplicative requirements may be getting in the way. One discussion draft would require the SEC and CFTC to conduct a joint study on whether further rules are needed for tokenized securities and derivatives. Another would direct the SEC to write rules allowing key market intermediaries to rely on blockchain records under specified conditions.

The witness testimony clearly shows the direction in which this is going.

Nasdaq’s John Zecca argued that tokenization should be integrated into the existing market system and said capital markets were moving toward a more continuous, more automated, and more interconnected structure.

SIFMA’s Kenneth Bentsen backed innovation while warning that investor safeguards and market coherence still have to travel with it.

DTCC took its usual incumbent position, supporting tokenization inside a regulated environment that preserves ownership rights and investor protections.

Even the NASAA letter for the record, written from a more skeptical angle, accepted the premise that tokenized securities are real securities and should remain fully subject to securities law. (Federal Register)

Speed, collateral, and who writes the rules of tokenization

The main talking point behind this institutional push for tokenization is efficiency.

However, the fast settlement Wall Street is talking about is only a small piece of the puzzle. A much bigger piece is mobile collateral, and for large legacy financial firms, it’s most likely the more valuable one.

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When markets are stressed, the problem is rarely confined to price alone. Price volatility leaves capital trapped in the wrong place, transfers take too long, and the delays between trades, margin calls, and usable cash start to bite.

Tokenized cash and securities promise a system where valuable assets can be moved, pledged, and reused quickly and with much less friction.

The public story about tokenization is efficiency. The institutional story runs deeper. Faster settlement is one piece. More mobile collateral is another, and for large financial firms, it may be the most valuable one. When markets come under stress, the problem is rarely confined to price alone. Capital gets trapped in the wrong place, transfers take too long, and the delay between a trade, a margin call, and usable cash starts to bite. Tokenized cash and tokenized securities promise a system where valuable assets can be moved, pledged, and reused with less friction. Citi’s already working on building a future trading environment with real-time liquidity and fully automated processes. BMO’s move with CME is built on the same premise.

Then there’s control.

Whoever builds the rails for tokenized cash, tokenized securities, and tokenized collateral gains an enormous position in the next version of market structure. Exchanges and banks want that role, but clearinghouses seem to want it more than everyone else.

Nasdaq’s SEC approval shows exchanges were the first to move from theory to implementation. But NYSE’s partnership with Securitize shows rivals aren’t sitting still. DTCC’s tokenization work shows the post-trade establishment intends to adapt rather than surrender. Meanwhile, Congress is starting to shape the legal terms on which that transition will happen.

The latest hearing makes this look like a coordinated shift in market structure, instead of a burst of random private-sector experimentation. Everyone wants similar things: banks want markets that work on internet hours, exchanges want tokenized trading to happen on their platforms, and clearinghouses want digital assets to remain tied to existing technical and regulatory frameworks.

Lawmakers want to know how much the existing legal structure needs to change to accommodate all that.

Everyone is now arguing over the same future, which is usually how you can tell it has moved from pilot stage into the center of the system. (financialservices.house.gov)

However, that doesn’t mean that tokenization will deliver everything these companies are promising.

Fragmentation across chains and platforms is a real risk, interoperability is unfinished, and legal enforceability still needs cleaner answers. Institutions could spend years digitizing assets and end up with better branding, faster demos, but less actual improvement than advertised.

But the direction of travel is hard to miss. When BlackRock, BMO, Nasdaq, DTCC, JPMorgan, NYSE, and Congress all start speaking in versions of the same language, we can safely say that tokenization isn’t a crypto slogan anymore.

Crypto helped prove that money and markets can operate on continuous digital rails. Wall Street now wants a version of that future it can regulate, monetize, and keep inside the existing financial order.

The hearing on Capitol Hill made one thing plain: tokenization is no longer waiting for permission to enter the mainstream. The fight now is over who gets to define it. (financialservices.house.gov)

Mentioned in this article

BlackRock CME Group Nasdaq JPMorgan Citigroup Securitize

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