In his 2025 Annual Chairman’s Letter, BlackRock CEO, Larry Fink, re-affirmed his strong belief in the transformative power of tokenisation, outlining how it can revolutionise the financial sector by improving efficiency, reducing costs and, most importantly, democratising access to investment opportunities. He drew a parallel to the now-ubiquitous exchange-traded funds (ETFs), stating that, in the future, tokenised funds could become just as widespread. However, he also cautioned that the widespread adoption of tokenisation hinges on solving key issues, particularly around identity verification and the development of a robust regulatory framework. Fink highlighted further that some investments generate much higher returns than others, yet they remain largely inaccessible to retail investors; legal, operational and bureaucratic frictions are often the primary barriers. Tokenisation, he argued, can remove these hurdles and allow more individuals to participate in high-yield investment areas that were previously restricted to large institutions. He included in his thoughts that: "Tokenization can also democratize returns. Some investments have much higher returns than others but are often only accessible to large investors. One reason is that there are legal, operational, bureaucratic 'frictions'. Tokenization can remove these barriers and allow more people to gain access to high-yield areas.” However, Fink also frankly pointed out that the popularisation of tokenisation still faces a key technical and regulatory challenge: “One day in the future, I believe that tokenized funds will become an everyday configuration for investors like ETFs - but the premise is that we have to overcome a key problem: identity verification.”

Notably, the European Union (EU) has emerged as a leader in tokenisation, largely thanks to its proactive, regulatory stance and a number of pilot projects demonstrating the technology's real-world application. The European Central Bank (ECB) has been instrumental in pushing the boundaries of tokenisation within the EU. In 2021, the ECB issued its first digital bond using Ethereum blockchain technology; since then, the institution has continued to experiment with blockchain as a means of issuing and settling securities more efficiently and securely. These experiments have proven that DLT can be used to issue bonds with reduced settlement times and enhanced transparency. The Banque de France, in collaboration with the European Central Bank, has conducted several trials to integrate tokenised cash into bond settlement procedures. By exploring how central bank digital currencies (CBDCs) can operate alongside tokenised financial assets, these pilots aim to modernise and streamline capital market infrastructure. Meanwhile, Luxembourg has embraced blockchain technology with the Luxembourg Stock Exchange supporting security token listings. Germany has also passed laws to permit the issuance of blockchain-based securities, leading to the first fully digital bond issued by Siemens in 2023. These moves showcase how regulatory backing can spur innovation and adoption in traditional finance and these initiatives illustrate the EU’s commitment to tokenisation, not just in theory but in practice. They also underscore how Europe is balancing innovation with regulatory oversight, creating an environment conducive to the long-term adoption of tokenised assets. And unsurprisingly beyond Europe, financial institutions worldwide are actively engaging with tokenisation. Their projects span asset management, banking and infrastructure development - for example:· In 2024, Janus Henderson announced plans to manage the $11 million Anemoy Liquid Treasury Fundusing blockchain technology. The fund, which includes short-duration US Treasury bills, aims to streamline financial services and cut down on operational costs. Janus Henderson’s entry into the space signals growing interest among asset managers to tokenise traditionally low-risk instruments.

· Fidelity's digital asset arm is currently testing a dollar-pegged stablecoin. Although no release date has been announced, the initiative underscores the firm’s long-standing interest in integrating blockchain solutions into mainstream financial services.

· Goldman Sachs and BNP Paribas in May 2023, formed part of a consortium to launch the Canton Network, a public blockchain designed specifically for financial institutions. It allows for secure, interoperable and privacy-preserving transactions. The network aims to bridge disparate financial systems while adhering to stringent regulatory and privacy standards.

· SWIFT, the global financial messaging service, is planning to trial live digital currency transactions in 2025. These trials will focus on tokenised assets and CBDCs, with the goal of integrating digital currencies into the traditional financial system. This initiative is crucial, given SWIFT’s central role in cross-border payments and interbank communications.

· HSBC has launched Orion, a platform that allows clients to access tokenised deposits and tokenised gold. This move reflects the bank’s broader strategy to modernise its asset management offerings using blockchain technology.

· Securitize operates a platform for issuing and trading tokenised shares in private companies. Securitize is a pioneer in using blockchain to democratise private market investments and the firm is regulated by the SEC and FINRA, adding a layer of credibility and compliance to its operations.

These examples certainly show that tokenisation is no longer theoretical. Institutions are actively deploying blockchain solutions to increase efficiency, enhance transparency and democratise access to various asset classes. Private markets, including private credit and private equity, represent the next frontier for tokenisation. These markets are traditionally illiquid, opaque and accessible primarily to institutional investors so tokenisation offers a path to transform this landscape. The global private equity market is projected to be valued at USD 540.72 billion in 2024 with an anticipated increase from USD 593.28 billion in 2025 to approximately USD 1,349.95 billion by 2034, growing at a compound annual growth rate (CAGR) of 9.58% from 2025 to 2034. Similarly, the global private credit market is expected to maintain its strong growth trajectory with estimates indicating a market size of around USD 3 trillion by 2028. This market has expanded nearly tenfold, reaching USD 1.5 trillion in 2024.

Tokenisation offers several key benefits that could revolutionise the financial landscape, including:

· improve liquidity - one of the most significant advantages is its ability to improve liquidity; by enabling fractional ownership, tokenisation allows investors to trade smaller portions of assets, making it easier to enter and exit positions. And this increased market liquidity can have a profound effect on how assets are bought and sold, fostering a more dynamic and accessible marketplace.

· operational efficiency - the use of smart contracts can automate key processes such as compliance checks, settlements and record-keeping. This automation drastically reduces the need for intermediaries, cutting down on administrative costs and processing times. Furthermore, with smart contracts handling much of the operational burden, firms can streamline their operations, ultimately lowering costs and improving the speed of transactions.

· accessibility - tokenisation also makes traditionally exclusive investment opportunities more accessible. Lower investment thresholds mean that retail investors, who were previously shut out of high-value assets, can now participate in markets that were once dominated by institutional investors. By democratising access to previously restricted asset classes, tokenisation opens the door for a broader range of investors to diversify their portfolios and potentially tap into higher-yield opportunities.

· transparency and security - blockchain technology provides these, both of which are key components in building trust. Blockchain ensures that all transactions are recorded on an immutable, transparent ledger, reducing the risk of fraud and giving investors greater confidence in the integrity of their investments. This increased transparency is especially important in an age where regulatory scrutiny is intensifying, and financial markets are increasingly focusing on trust and accountability.

Meanwhile, the Depository Trust & Clearing Corporation (DTCC), a key player in financial infrastructure, is leading efforts to modernise private markets through tokenisation. DTCC's Digital Securities Management (DSM) platform offers a standardised infrastructure for issuing, transferring and servicing private market securities; the platform is designed to reduce friction in private market transactions by integrating blockchain solutions. In addition, DTCC has partnered with Chainlink for the Smart NAV pilot project with this initiative aiming to deliver structured mutual fund data on-chain, enabling real-time updates and supporting various downstream applications such as tokenised funds. These efforts highlight DTCC's commitment to laying the groundwork for scalable, compliant tokenised financial ecosystems. However, despite the promise, significant challenges remain before tokenisation can be fully realised. For tokenisation to achieve widespread adoption, several key challenges must be addressed. First and foremost, regulatory uncertainty remains a significant barrier. Clear, harmonised regulations are essential for broader acceptance and, whilst the EU has made significant progress, many other jurisdictions still lack the necessary legal frameworks to support tokenised assets. As Larry Fink highlighted, developing robust identity verification systems that comply with KYC (know your customer) and AML (anti-money laundering) regulations is a major hurdle. Certainly, until these systems are fully in place, tokenised funds will struggle to gain mass adoption. Furthermore, interoperability between blockchain networks remains a critical challenge. Since different blockchain platforms often operate in silos, achieving seamless interoperability is key to creating a unified tokenised ecosystem. Finally, traditional financial institutions face the need to upgrade their legacy systems to interact with blockchain-based platforms and this will require substantial investment in both technology and talent, making infrastructure readiness another important consideration for the future of tokenisation.

Larry Fink's 2025 Chairman’s Letter indeed encapsulates the growing consensus around tokenisation as a game-changer in the world of finance. So, whilst hurdles remain, progress being made in regions such as the EU and by global financial institutions suggests that the foundation is being laid for a more inclusive, efficient and transparent financial system. Tokenisation has the potential to unlock trillions in previously illiquid assets, democratise access to high-yield investment opportunities and revolutionise how we think about ownership and value transfer. But, arguably the biggest risk is fragmentation. Without cross-industry alignment on shared infrastructure, tokenisation could repeat the sins of legacy finance: silos, inefficiencies and walled gardens. The tipping point is not just technological - it is strategic. Institutions must act now or risk being shaped by the first movers. This is not merely the next phase of fintech, it is the future of finance - rebuilt from the ground up. As Fink optimistically predicts, one day, tokenised funds could become as ubiquitous and transformative as ETFs - but only if the financial world rises to meet the challenge.

This article first appeared in Digital Bytes (29th of April, 2025), a weekly newsletter by Jonny Fry of Team Blockchain.