Executive summary
Asset tokenization has entered a new phase. No longer a peripheral innovation theme associated primarily with crypto-token ecosystems, it is becoming embedded in the core architecture of regulated capital markets. Three developments make this clear. First, Depository Trust and Clearing Corporation’s (DTCC) December 2025 tokenization initiative established a credible regulatory pathway for tokenized recording of security entitlements inside the US markets’ central post-trade infrastructure. Second, London Stock Exchange Group’s (LSEG) July 2026 ‘LSE 24’ announcement signaled that major exchanges are redesigning market access around new continuous, algorithmic and globally distributed trading activity. Third, the industry-wide drive toward T+0 (or ‘nearreal-time’) settlement is placing new pressure on institutions to eliminate operational latency, manual breaks and fragmented controls across the transaction lifecycle.
Taken together, these developments point to a structural shift in financial industry operating models. The implication is not that tokenization will replace existing market infrastructures in the near term. It is rather that tokenization is emerging as one of the few credible mechanisms for synchronizing ownership data, transfer logic, collateral status, tax attributes, lifecycle events and reporting obligations across an increasingly time-compressed market environment.
For executive leadership teams, this is an enterprise transformation issue rather than a product innovation topic. CIOs should assess tokenization through the lens of portfolio utility rather than technological novelty. For CFOs it would be advantageous to view tokenization through the lenses of liquidity efficiency, cost-toserve and balance-sheet velocity. COOs should recognize it as an opportunity to optimize lifecycle ownership, exception management and operating resilience. For CROs the main objective would be to preserve controls effectiveness as the operating model becomes faster and more distributed. CTOs should treat it as an interoperability, control and data architecture foundation for the future. Tax, legal and compliance leaders should now place more priority on the OECD’s Crypto-Asset Reporting Framework (CARF), which is beginning to shape how tokenized workflows must be clarified, evidenced and reported across jurisdictions.
The central thesis of this whitepaper is straightforward. The strategic significance of tokenization does not lie in digitizing instruments for its own sake. It lies rather in enabling banks, asset managers and asset-servicing ecosystems to operate with greater continuity, precision and control as trading hours extend, settlement cycles compress, and regulatory expectations become more data-intensive. Institutions that act now can help shape optimized target operating models, while the rules are still being defined. Those that wait risk ceding influence over the market structures and operating models that will determine their future competitiveness.
A structural inflection point
The financial industry has spent the last decade improving the speed of market access while leaving much of the post-trade chain fundamentally sequential. Trading stacks became faster, more automated and more globally distributed, yet settlement, servicing, transfer controls and tax and regulatory reporting often remained dependent on cutoffs, manual interventions and multiple layers of message-based reconciliations. That model was sustainable in a world defined by discrete market windows and settlement cycles long enough to absorb operational ambiguity. However, it becomes fundamentally less resilient – to the point of being clearly inadequate – in a world characterized by 24x5 trading markets, compressed settlement timescales and higher regulatory expectations around data quality and reporting standards.
This is why the December 2025 DTCC development matters.1,2,3 DTC’s SEC staff no-action relief did not merely authorize another industry pilot. It also validated the proposition that tokenized assets can sit alongside the core infrastructure of regulated securities markets without undermining established legal frameworks or settled market practices. That point has broad strategic significance: once tokenization is anchored inside regulated post-trade mechanisms, it then moves from conceptual possibility to
mandated operating-model option.
LSEG’s ‘LSE 24’ announcement carries similar weight, albeit from a different angle.4,5,6 By extending weekday market access towards near-continuous trading, LSEG is effectively signaling that historical assumptions about acceptable market hours, operational handoffs, surveillance windows and servicing timetables can, and eventually will, be challenged. Of course, this does not by itself constitute a mandate for tokenization. It does, however, intensify the commercial and operational need for infrastructures that can maintain persistent state and control integrity beyond traditional market windows.
The push towards T+0 settlement is the third force completing the picture.7,8,9 Across jurisdictions, policy and market direction continue to favor shorter settlement cycles, higher automation, lower frictions and improved liquidity usage. Yet, T+0 at scale would not be primarily a messaging problem, but rather an intraday liquidity, control and synchronization one. Financial institutions cannot settle faster simply by accelerating instructions; they must also establish realtime certainty on asset availability, beneficial ownership, transfer eligibility, collateral sufficiency, tax treatment and exception status. Tokenization then becomes strategically relevant, as it offers a path to representing more aspects of concrete lifecycle states in a synchronized, consistent and machine-processable form.
Why are these developments converging now?
A narrow reading of current market developments would treat DTCC tokenization, LSE 24 and T+0 roadmaps as parallel but separate trends. That would be missing the point: each and every one of said developments increases the value proposition of the other two.
DDTCC’s initiative increases the institutional credibility of tokenization by bringing it inside the perimeter of regulated U.S. post-trade infrastructures. LSE 24 increases the business value of synchronized post-trade outcomes because around-the-clock trading extends market depth, under the proviso that books, controls and follow-on entitlements remain coherent. The T+0 settlement imperative increases the urgency of transaction lifecycle redesign, as the tolerance for breaks, re-keying and batch-based exception handling will decline sharply across market participants and regulators alike.
The resulting strategic calculation is clear: tokenization is emerging as not simply a workflow around a new asset format, but rather as an operating infrastructure for compressed market lifecycles.1,3,8,10 In practical terms, that means that tokenization should be assessed less on whether it creates a novel client proposition, and more on whether it reduces reconciliation drag, improves collateral mobility, sharpens intraday balance-sheet visibility, strengthens value transfer controls and lowers the cost of accurate tax and regulatory reporting.
This calculation is especially important for senior management. Many financial institutions continue to evaluate tokenization in the same governance forums as those tasked with digital-asset experimentation and broader technical innovation. That approach is simply too narrow. The more relevant framing would be to evaluate it as enterprise-level change spanning client-facing, market infrastructure, custody, servicing, tax, risk and data management units. Once approached in that way, tokenization ceases to be a speculative technology agenda point and occupies its true space as a board-level, strategic business model question.
Jurisdictional outlook
United States and North America
The December 2025 SEC staff no-action relief granted to the Depository Trust Company (DTC) is the defining U.S. development in scope. It authorizes a limited, voluntary pilot in which participants may elect to have claims to DTC-held securities registered using distributed ledger technology rather than only through DTC’s traditional (i.e. centralized) ledger. DTCC subsequently confirmed in May 2026 that more than 50 firms had joined development efforts around this service, reinforcing the perception that the initiative is not a theoretical exercise but an ecosystem development program with broad market resonance.
The significance of this development extends beyond the pilot itself. It demonstrates that regulated incumbents are willing to incorporate tokenized representations of value in existing legal and operational frameworks .14,15 That should eventually lower the adoption threshold for other banks, custodians and asset managers, because the choice is no longer between legacy infrastructure and an entirely new market model; it is rather between remaining fragmented and moving towards synchronized coexistence.
From a North American perspective (due to osmosis with the US ecosystem), the broader message is that tokenization will be judged through post-trade economics, resilience and scalability outcomes, rather than through crypto-market rhetoric. That is a more consequential test and, for established financial institutions and other market participants, a more investable one.
United Kingdom
LSEG’s July 2026 LSE 24 announcement has strategic importance well beyond its initial product scope. The LSE 24 venue is intended to operate separately from the Main Market, offer near-continuous weekday trading, commence client testing by the end of 2026 and launch with exchange traded products (ETPs) in the first half of 2027 (subject to regulatory approval). That signals a willingness by one of the world’s major exchanges to redesign market participation around globally distributed, machine-driven activity.
The implication for the UK is clear. Once trading extends beyond conventional windows, financial institutions must reassess eligibility, order management, pre-funding, custody operations, settlement dependencies, surveillance reports, tax-lot continuity and corporate-action mechanisms and associated controls. This creates a strong pull towards more persistent, machine-processable asset representations and more automated post-trade control frameworks. In this respect, LSE 24 should be understood less as an isolated extended-market-hours initiative and more as a catalyst for operating model modernization.
The UK is also relevant in the CARF context, because it is among the jurisdictions moving early on implementation timing.11,12 This increases pressure on financial institutions to design tokenized operating models with embedded residency, account-linkage and reporting logic from the outset.
European Union
The EU already has a formal legal framework for tokenized financial market infrastructures through the distributed ledger technology (DLT) Pilot Regime. Since March 2023, said regime has provided the basis for DLT multilateral trading facilities, DLT settlement systems and integrated trading-settlement systems under a controlled exemption model. In April 2026, the European Commission explicitly linked tokenization to reduced payment and settlement frictions, improved liquidity management, programmability potential and streamlined reconciliation, while also signaling that the framework would need broadening if EU digital markets are to achieve meaningful scale and competitiveness.
This is a significant policy marker. The EU is no longer debating whether tokenized securities belong inside regulated markets. The debate has already shifted to how quickly the framework can evolve from experimentation to institutionalization without undermining investor protection, MiFID II discipline or market integrity. For EU banks and asset managers, the practical opportunity lies in use cases where process frictions are already substantial: UCITS funds, bonds, collateral pools, trade finance, subscription credit facilities, transfer restrictions and cross-border servicing.
CARF adds a further layer of complexity because the EU’s broader reporting and transparency agenda is increasingly intolerant towards ambiguous asset classification and fragmented intermediation chains. As tokenized instruments sit closer to the boundaries between securities, crypto-assets and digitally transferable claims, institutions will need sharper classification, stronger data lineage and more robust governance over reporting consequences.
Switzerland
Switzerland continues to occupy an important position as a reference jurisdiction for tokenized rights. The Federal Council and the State Secretariat for International Finance describe the Swiss distributed ledger technology legal framework (effective from August 2021) as creating legal certainty for tokenized assets, enabling ledger-based securities and allowing for licensed DLT trading facilities.16,17 In addition, in October 2025 Swiss authorities opened consultation on amendments intended to improve market growth potential and integrate innovative financial technologies, while safeguarding market integrity and investor protection.
For international financial institutions, Switzerland’s significance is anchored not only in fintech reputation, but, more significantly, in legal certainty. It provides a practical model for embedding tokenization into mainstream private-law and market-infrastructure architectures. This is highly relevant to institutions seeking to test novel issuance, transfer control, custody and distribution models within a welcoming environment with comparatively mature legal clarity.
Switzerland also matters for cross-border wealth and booking models interacting with CARF-implementing jurisdictions. Even where Swiss law provides clean recognition of tokenized rights, internationally active financial institutions still need aligned client, residency, asset-classification and transaction-lineage data to support downstream reporting and tax transparency obligations. Robustness of regulatory disclosures (also as a first-base position from which to manage regulatory risk) will of course follow.
Singapore
Singapore has positioned itself as one of the most prominent institutional tokenization hubs in Asia. The Monetary Authority of Singapore (MAS) has published a Guide on the Tokenization of Capital Markets Products, clarifying how securities laws and related legislation apply to tokenized capital markets products and to entities facilitating their issuance and intermediation.18 MAS has also advanced practical operating models of tokenization through project ‘Guardian’ and related work on tokenized funds.19
Singapore’s strategic importance lies in the way it combines legal clarity with supervisory expectations of production-grade operating controls. For banks and asset managers it is a strong jurisdiction in which to test tokenized funds, digitally native servicing models, tokenized collateral mobility and cross-border distribution arrangements without worrying if regulatory ambiguity will influence the market acceptance of robust token ecosystem designs.
Singapore is also relevant from a CARF perspective. Its active regulatory support for asset tokenization, combined with its commitment to implement CARF, reinforces the importance for financial institutions of developing robust tax residency, client identity, transaction attribution and wallet-account linkage capabilities, which support both regulatory reporting and participation in regulated tokenized markets.
Hong Kong SAR
Hong Kong has also taken meaningful steps forward towards asset tokenization. On 20 April 2026, the Securities and Futures Commission (SFC) issued a circular on the tokenization of SFC-authorized investment products which sets out detailed conditions relating to disclosure, primary market dealing, secondary trading, operational soundness, record keeping, cybersecurity, smart-contract integrity, business continuity, legal prerequisites and prior-consultation practices.20,21 This level of specificity makes Hong Kong SAR one of the clearest examples of a regulatory jurisdiction moving from conceptual openness to actionable supervisory expectations.
Hong Kong is therefore particularly relevant for institutional product manufacturers and platform operators. It can be argued that it leads the way in demonstrating what an effective supervisory framework for asset tokenization at scale could look like in practice. It also underscores a broader market truth, namely that tokenization is not reducing the need for controls, but rather re-assigning and (at least partially) intensifying them.
Although Hong Kong’s CARF implementation timeline may lag the earliest wave, internationally active financial institutions should not interpret this as a reason to defer framework readiness. Cross-border distribution models and multi-jurisdictional asset servicing chains will still require high-quality tax-relevant data capture and classification from transaction inception.
India
Today, India still remains more significant as an asset distribution, servicing and tax-reporting jurisdiction than as an institutional tokenized securities hub. Official tax guidance confirms the taxation of virtual digital assets and relevant withholding/reporting obligations, including references to reporting requirements for specified entities.22 Draft-rule developments in 2026 also indicate a widening of the tax reporting perimeter to cryptoassets and related digital products.23
The practical message is clear: in India, reporting and taxation considerations may end-up shaping tokenized business models before capital-market regulations do. Any asset structure touching India-nexus clients, distribution, taxable events or local intermediation should therefore be assessed primarily through classification robustness, transaction-level traceability and reporting repercussions. For many financial institutions, this will probably influence where products are booked, which investor groups are targeted and how cross-border platforms are designed.
Japan
Japan is strategically important for the value proposition of asset tokenization, because it couples sophisticated financial regulation with comparatively advanced CARF implementation initiatives. Japanese domestic CARF requirements took effect from 1 January 2026, so that affected entities are already obliged to verify tax residence and submit annual reports on covered activities.24 Importantly, updated interpretative material has addressed the treatment of electronically recorded transferable rights representing securities, clarifying that said rights are treated as cryptoassets for CARF purposes only when they also have the characteristics of cryptoassets under the Payment Services Act.25
This distinction is highly significant. It shows that tokenized securities in Japan do not automatically self-classify with respect to CARF, their classification rather depending on their actual legal and functional characteristics. For financial institutions designing products across jurisdictions, this means that rights analysis, asset structuring, transfer logic and custody design can all influence token classification, and by extension determine tax-reporting obligations. Japan therefore provides one of the clearest examples of why asset tokenization initiatives must be governed by multi-disciplinary business, operations, legal, tax and technology teams.
Cross-jurisdictional legal signals
In our estimation, court-led precedent remains less developed than regulatory guidance in the area of asset tokenization. The implication is important: throughout 2025 and 2026, the area’s operative legal architecture was being built primarily through no-action relief, circulars, statutory frameworks, supervisory guides and tax FAQs rather than through a deep body of jurisdictional case law. Financial institutions should therefore assign these tokenized instruments the same attention they would traditionally reserve for assets under still evolving (and not settled) judicial doctrines.
Tokenized workflow risks and opportunities
Cross-ledger interoperability
Cross-ledger interoperability is becoming a decisive design requirement as tokenized markets move from isolated pilots to production ecosystems.26 The core issue is no longer whether a digital representation of value is allowed to exist on a distributed ledger; it is rather whether assets, liquidity, collateral, identity and reporting data can move coherently across multiple (centralized and distributed) ledgers, networks and service providers without introducing reconciliation breaks or legal ambiguities.
For banks, interoperability has three dimensions. The first is technical: standards, APIs, smart-contract logic, identity frameworks and message formats must support transferability across venues and infrastructures. The second is operational: settlement, custody, collateral management, treasury and compliance processes must be able to consume and validate state from more than one ledger without duplicating risk controls.27 The third is legal: firms must know which ledger is authoritative for ownership, settlement finality, pledges, control transfers and reporting-relevant classifications – and in which jurisdiction.29
This matters because tokenized markets are already fragmenting across public chains, permissioned networks, CSD-centered infrastructures and bank-owned internal ledgers. The ECB, for example, has explicitly identified platform fragmentation as one of the main obstacles to digital asset scale, and it has framed interoperability and shared standards as central building blocks of the EU’s tokenized financial market architecture.33
Industry initiatives around digital asset securities interoperability further indicate that market participants are converging on the same conclusion: without a common interoperability layer, tokenization risks recreating the very silos it was meant to eliminate.
The original strategic argument is that interoperability is the hidden prerequisite for every other tokenization use case. T+0 settlement cannot operate across fragmented ledgers unless asset rights state, liquidity state and collateral state can all be trusted to be accurate across systems in real time. Likewise, CARF reporting becomes materially harder when transaction data is split across multiple networks, cross-ledgers and intermediate service providers. Interoperability is therefore not a back-office engineering concern, it is rather a stakeholder-level (and sponsor-level approved) design specification for a robust and sustainable tokenized finance business model.
For senior executives, the practical response should be to define an interoperability strategy before scaling production. That strategy should answer four questions, namely:
- Which ledgers, or networks, are to be in-scope?
- Which blockchain layer is to be the authoritative one for ownership and settlement finality?
- How are identity and reporting data to be normalized across networks?
- And which interoperability or platform design (bridge, roll-up, oracle or other) is to orchestrate value and state transfers, collateral mobility and valuation signals, and finally exception handling across the target ecosystem?
Custody risk management in T+0 settlements
Custody risk management becomes materially more important as accepted settlement standards compress towards T+0. The traditional custody model benefited from built-in time buffers: a total buffer allocation was providing time to affirm standing settlement instructions, source securities, mobilize collateral, investigate breaks, validate corporate-action status and repair mismatches, all before final settlement could crystallize. In a T+0 setting, that allowed time buffer shrinks sharply. The custody function therefore moves from a largely post-trade paradigm to an intraday risk-orchestration one.27,31
This has four strategic consequences.
First, asset structure and rights certainty become critical control objectives. Custodians and their clients must know, with far greater detail than traditionally expected, which legal entity owns what, where it is held, whether it is available to settle, whether it is encumbered, and whether any transfer restrictions or servicing events affect availability. Tokenized asset models may help by making both structure and rights more visible (ascertainable), but only if legal ownership, ledger design and custody records remain demonstrably aligned.30
Second, operational resilience may be re-engineered around intraday exception management. In T+1 and longer settlement settings, many custody breaks can be escalated and repaired after the trading session ends. In T+0, however, unresolved SSI issues, mismatched account selections, incomplete tax attributes, sanctions hits, corporate-action ambiguities or ledger reconciliation breaks can all translate almost immediately to settlement failures – and potentially to emergency funding requests.31 Custody operating models will therefore need higher automation, pre-validation and live observability mechanisms.
Third, collateral and liquidity controls become inseparable from custody ones. Shorter settlement windows reduce counterparty exposures in principle, but they also reduce the time available to source liquidity, substitute collateral, meet margin calls or resolve failed allocations. Recent industry commentary has pointed out that accelerated settlement can lower exposures, albeit while raising short-term liquidity and operational risks if supporting controls lag behind market latencies.28 This means that custodians, triparty agents, treasury teams and clearing functions must all operate against a much more tightly synchronized intraday view of inventory, collateral eligibility and funding capacity.
Fourth, digital assets and tokenized custody both introduce new control domains that traditional custody teams do not always own today. Private-key governance, wallet-account linkage, smart-contract dependency management, blockchain node or network resilience and cross-ledger reconciliation all become intertwined and relevant once tokenized assets enter production workflows.32 These are not reasons to reject tokenization, they are rather reasons to elevate custody architecture, governance and controls testing to the level of operational cornerstones before scaling tokenized T+0 use cases.
The executive implication is clear: for boards, CIOs, COOs and heads of custody, T+0 should be treated as a custody transformation agenda as much as a settlement initiative. Financial institutions that accelerate settlement without re-designing custody controls will be simply shifting risk from end-of-day processing events to intraday liquidity events, servicing failures and evidentiary gaps. Whereas those that strengthen custody risk management will be able to leverage T+0 settlement capabilities to strengthen their competitive resilience posture.
A robust custody risk management program for tokenized and accelerated settlement markets should include at least six priorities:
- Tokenized assets registry, common across custodians, sub-custodians, CSDs, wallets and internal books
- Pre-trade and pre-settlement validation of SSIs, account eligibility, encumbrance status, watchlist controls (on both transaction participants and collateral) and tax attributes
- Intraday reconciliation across tokenized asset ledgers, traditional books and external infrastructures
- Explicit governance arrangements over private keys, wallet operations, recovery processes and smart contract change management (where tokenized assets are involved)
- Tight integration of custody, treasury, collateral management and securities-financing functions
- Escalation playbooks for intraday breaks, including fail prevention, fallback settlement and client communication protocols.
In short, the practical question to answer will be not whether T+0 is effective in isolation, but whether the custody model can also carry the subsequent operational load without creating new failure points. The institutions most likely to succeed will be those that treat custody as the ultimate T+0 control system, rather than as a passive post-trade ‘consumer’.
The CARF perspective
CARF can be mistaken for being simply a tax-reporting overlay. Such a view would be severely incomplete. In practice, CARF has the hallmarks of becoming a design parameter of tokenized operating models. By requiring the reporting and exchange of information on certain crypto-asset transactions, it increases the strategic value of being able to leverage high-quality token classification, transaction lineage and participant identifier data.
Its expected influence on the success of asset tokenization can be grouped into four areas.
First, CARF forces financial institutions to be systematic and disciplined in classifying tokenized instruments. The more the use of tokenized securities, fund units, digitally transferable claims and other crypto-assets converges in market designs, the more severe the consequences of deficient token classification become. The financial institution may be lulled into false assurance of reporting quality, even when actually misreporting, or applying controls that are inconsistent with the underlying token design.
Second, CARF moves reporting requirements upstream in tokenized asset processing. Recording tax residency, beneficial ownership, account or wallet linkage and transaction attribution can no longer be considered as after-thoughts in process design. They must all be embedded in onboarding, booking and lifecycle processes from the beginning. This is actually one of the reasons why tokenization should be considered to be a COO focus point, rather than merely a compliance-area one.
Third, CARF changes the economics of token asset distribution. The more fragmented the intermediation chain, the more difficult it becomes to preserve clean reporting obligations and a defensible data lineage. This fact will tend to favor operating models based on robust ‘source-of-truth’ data and clear ownership of process governance and reporting tasks.
Fourth, asset tokenization will itself influence CARF implementation. As more conventional financial instruments acquire tokenized representations, tax authorities and regulators will face mounting pressure to clarify the reporting perimeter at the boundary between securities law, tax law and crypto-asset regulation. Japan’s interpretative treatment of on-chain transferable rights is an early example of this broader policy dynamic.
The strategic conclusion is that CARF will expose weaknesses in tokenized workflows in the same way as the T+0 roadmap will expose weaknesses in settlement workflows. Financial institutions that approach CARF as a narrow tax workstream will miss its deeper relevance to the future value of high-quality client data, operating design and product architecture.
Real-time collateral optimization
Real-time collateral optimization is one of the clearest economic cases for tokenization in banking. Banks manage large collateral pools across securities financing, derivatives, repo, prime brokerage and Lombard desks, and the potential economic value of improved outcomes is substantial. Tokenized collateral can reduce process frictions, lower excess buffers, improve substitution speed and support more efficient use of high-quality liquid assets.
The key operational shift is from static collateral allocation to continuous collateral orchestration. That requires banks to know, intraday, which assets are eligible; where they are located; what they are pledged against; what haircuts apply; and which counterparty obligations are coming due. In practice, this means that collateral optimization becomes inseparable from sourcing, pricing, custody and funding decisions. If one of those inputs are stale, the end-to-end result is sub-optimal – sometimes drastically so.
Recent market developments point in the same direction. The ECB has moved to accept tokenized securities as collateral in its liquidity and funding framework, while US and wider industry initiatives around tokenized collateral and shared ledger infrastructures are pushing towards 24x7 or near-real-time margining and transfer models.33,35,36 For banks, this means that collateral optimization is no longer simply about minimizing current-day funding costs, but more importantly about creating a system that can continuously re-rate the balance among liquidity, encumbrances and regulatory eligibility.
The executive question is therefore not whether tokenized collateral can improve efficiency. The real question is whether the bank can operationalize and robustly execute the controls required to make efficiency gains dependable under market stress. That requires not only technology, but also process governance over eligibility rules, intraday valuation, dispute handling, legal enforceability and backup settlement.
Implications across the products and services lifecycle
The impact of tokenization is most visible when viewed across the end-to-end operating lifecycle, rather than by sector (product or service) alone.
At issuance and onboarding, tokenization can reduce frictions in asset structuring, investor eligibility, transfer controls execution and settlement perfection. In an asset management context, this could materially improve transfer agent and distribution processes, provided token and mechanism designs are robust.
In trading and execution, tokenization becomes more valuable as market access extends. On-chain asset state machines can support better alignment among transaction controls, execution, servicing and surveillance, particularly where investor bases and liquidity are globally distributed.
For clearing, settlement and collateral management, the benefits of tokenization are strategically most consequential. This is also where compressed settlement cycles create the greatest need for synchronized ownership, liquidity, collateral and instructions data.
When it comes to asset servicing, mandate/fund administration and corporate actions, the value of tokenization stems from execution and traceability improvements. These may be difficult to prioritize initially, as they depend on accurate synchronization (ideally by smart contract) across intermediation chains, and as tax and nominee structures may introduce local complexities. Tokenization can simplify parts of the synchronization tasks, but only if property rights, event logic and reporting obligations are represented on-chain consistently along the value chain.
For finance, risk and reporting, tokenization has the potential to drastically improve intraday visibility and thus reduce ambiguity of inputs to decisions. At the same time, it raises expectations around data governance, ledger reconciliation, third-party oversight, cyber resilience and tax transparency. In this sense, tokenization is both a compelling opportunity and a controls challenge.
It is a central thesis of this whitepaper that only an examination against the end-to-end business model of a bank or asset management company will generate the most compelling and durable enterprise value gains from asset tokenization. The industry direction is unmistakable and, in all probability, unstoppable, but it will be the wrong decision to focus only on token design and asset issuance before deciding on whether or not to follow the travel. The optimal operating point may not even be to create own tokenized assets, but rather to embed the tokenized paradigm into one’s own business model as a means to extract the highest possible business benefit from what will probably be a mandatory business capability in the future.
Implications by executive function
Chief Investment Officer
For the CIO, tokenization is relevant as it sits at the intersection of portfolio implementation, liquidity access, collateral usage and investment-product distribution. In a world moving towards faster settlement and more continuous trading, the CIO function increasingly has to think not only about expected return and risk profiles, but also about how assets behave operationally across trading venues, custodians, jurisdictions and financing channels.
Two themes matter most. The first is cross-ledger interoperability. CIOs need assurance that tokenized positions can be represented consistently and move seamlessly across multiple networks without creating basis risk among the investment book, the custody records and collateral management. The second is real-time collateral optimization. For banks with trading, financing and prime brokerage activities, the ability to reuse high-quality collateral dynamically across positions is becoming a material balance-sheet and funding advantage.
The practical implication is that CIOs should assess tokenization through the lens of portfolio utility rather than technology novelty. Where tokenized assets improve value utility, financial optionality or collateral mobilization, they can enhance total portfolio efficiencies. Where they simply add operational complexity without improving efficiencies, then they should be treated as being simply a friction-minimizing option, not a strategic asset direction.
Chief Financial Officer
The CFO agenda begins with economics. Tokenization should be evaluated against measurable value pools: failed-trades reduction, lower reconciliation costs, reduced trapped collateral, faster and more certain cash cycles, improved collateral substitution (eventually, transformation), lower servicing frictions, and generally more efficient use of the balance sheet under shorter settlement windows. A robust finance-led tokenization business case should also capture loss avoidance: operational risk losses, client remediation expenses and liquidity inefficiencies that arise when financial institutions attempt to accelerate processes while still burdened with fragmented data and non-aligned control structures.
The most important CFO insight from the three afore-mentioned developments is that T+0 settlement is likely to re-price operational efficiency in the corporate value equation. In traditional settlement cycles, cost structure inefficiencies are often hidden within acceptable time buffers, handoff iterations and deferred exception handling. In compressed cycles, on the other hand, those same inefficiencies get magnified in the form of excess intraday liquidity demand, higher financing cost or failed client value monetization. Tokenization then becomes relevant, because it can safeguard financial outcomes by shifting focus from reactive/corrective to preventative controls.
Chief Operating Officer
The COO’s view deserves particular emphasis. Tokenization is, at its core, an operating model re-design problem. It changes where lifecycle ‘truth facts’ are created, who owns exceptions, how servicing obligations are discharged, and where control failures become commercially material. In the traditional world, many breaks can be identified after the fact and still be repaired through overnight workflows. In a T+0 or 24x5 world, on the other hand, unresolved temporary ambiguity has the potential to become a time-critical liquidity, client-servicing or conduct-risk issue.
This shift has major implications for operating designs. COOs will need to rethink process boundaries among front-office, middle-office, custody, treasury, tax operations, fund administration, mandate operations – and compliance throughout. They will need to re-design exception hierarchies, so that the most critical breaks are surfaced and resolved intraday – especially in ‘alert storm’ situations. They will also need to review outsourcing, service-center and global delivery models, because tokenized lifecycle events and CARF-related data obligations will increasingly require globally consistent first line of defense controls, rather than regionally coordinated (and sometimes improvised, due to lack of prior experience) exception handling.
Chief Risk Officer
For the CRO, tokenization matters because it changes the distribution of operational, liquidity, legal and model risks across the business landscape. The principal question is not whether tokenized assets are innovative, but rather whether the institution can evidence control over legal title, settlement finality, custody segregation, smart-contract dependencies, cross-ledger reconciliation and reporting classification under stress.
Tokenization can reduce certain risks by improving transparency and shortening time-to-finality, but it also introduces new risk vectors. For example, a tokenized operating model may concentrate threat and failure modes into key management, legal classification logic, interoperability layers, oracle inputs or shared infrastructure governance. Those risks create new dependencies across the tokenized and traditional financial worlds, which sit alongside old risk constellations and can amplify them if controls are not engineered appropriately.
From a CRO standpoint, the main objective is to preserve control effectiveness as the operating model becomes more accelerated and more distributed. That means reviewing whether existing risk appetite statements, first line of defense controls, operational resilience tests, outsourcing oversight, incident response playbooks and recovery procedures still hold when settlement timescales compress towards T+0 and when custody, collateral and reporting processes increasingly depend on synchronized digital state.
The CRO should also plan for cross-risk scenario testing in a ‘new world’ setting, so to speak, e.g. one that combines market risk with legal and on-chain operational risk stress factors. The critical test cases in a cross-ledger world are not only price shocks or volatility spikes, but also mis-classified tokens, smart contract bond-function inefficiencies, ledger outages, cross-jurisdiction service disruptions, wallet compromises, failed interoperability bridges, intraday margin calls/liquidations and cross-ledger tax reporting. In tokenized markets, resilience is not proven by considering average-day scenarios and estimated recovery time objective (RTO)/recovery point objective (RPO) metrics; it is rather proven when multiple dependencies are assumed to fail at once (in continuous, T+0 markets), and the institution can still evidence asset ownership/encumbrance, best execution and transaction finality controls.
Chief Technical Officer
For CTOs, the issue is not whether distributed ledger technology can be connected to, and within, the enterprise; it undisputably can. The harder question is whether the financial institution can create canonical asset and event models that span legacy and tokenized environments, while satisfying legal certainty, auditability, performance and resilience requirements. Without such common canonical models, tokenization risks becoming an additional layer of complexity and controls fragmentation rather than a cure for it.
This is particularly acute in hybrid, mostly independently evolving, legacy and tokenized environments, which will inevitably define the medium-term situation in the industry. Core, proven, transactional systems, books and records, custody platforms, treasury platforms, fund-accounting engines, transfer-agent workflow systems, tax and regulatory reporting systems will not be decommissioned because assets may transition to tokenized representations. The winning architectures will therefore be those that demonstrate robust interoperability and observability across infrastructures, starting from the proven existing ones, rather than targeting wholesale replacement prematurely.
Actions for executive committees
For financial institutions seeking a practical path forward, five actions should be prioritized over the next 12 to 24 months:
- Define the enterprise thesis. Establish whether alignment with industry asset tokenization momentum should be pursued primarily for product innovation, post-trade efficiencies, distribution re-design, collateral mobility or market-infrastructure positioning. Without a clear thesis, tokenization activities will not progress past the pilot phase, as they will fail to prove any strategic value proposition.
- Select jurisdiction(s) for rollout. The operating, tax and regulatory implications differ materially across potential client and asset domiciliation jurisdictions. Use-case selection must therefore be aligned with jurisdiction selection. Failure to do so will mask unforeseen risks and may result in tokenization investment reversal.
- Build a target operating and data model (at least in reduced scope), before scaling. Asset classification, client identity spanning traditional and blockchain rails, asset domiciliation, property rights structuring within the token, ownership transfer logic, shadow liquidity and collateral management, tax parametrization, internal and external reporting obligations should be part of initial model design.
- Treat T+0 and CARF as design inputs from the beginning. Settlement timescale compression and reporting transparency will soon be obligatory industry capabilities, not elective process choices. Thus, they should be treated as target-state requirements.
- Re-design operating controls. Control points, exception ownership, intraday observability, third-party oversight, private key management, smart contract governance and end-to-end auditability should be designed to operate across the traditional and blockchain rails from the outset of tokenization implementation initiatives.
Closing perspective
The significance of DTCC’s 2025 tokenization initiative and LSEG’s 2026 LSE 24 announcement lies not in the narrow details of either. Their importance is that they jointly reveal where regulated financial market infrastructures are heading to: towards more continuous markets, more configurable assets and tighter coupling among product design, trading, settlement and post-trade operations.
This transition will not be linear, and it will not produce a fully on-chain financial system in the near term. The more probable outcome is a hybrid market architecture, in which incumbent infrastructures progressively adopt tokenized representations and programmable controls enabling improved efficiencies without compromising legal certainty or market integrity. That hybrid model is already emerging.
The financial institutions most likely to profit will not be those that tokenize the greatest number of instruments the fastest. They will rather be those that re-design their holistic operating, data and controls models most effectively around the realities of 24x5 trading, compressed settlement times and global reporting transparency. For boards and executive committees, this is the moment to move from anticipation to design.
Capco: your asset tokenization strategy and implementation advisor
Capco is uniquely positioned to assist financial institutions with designing and operationalizing robust, forward-looking asset tokenization capabilities. Drawing on a strong track record in capital markets, regulatory interpretation and digital assets consulting, our teams work seamlessly with clients to integrate new products and services into their operational environments.
Our business offerings encompass a whole range of services and solutions designed to support the institutional adoption of digital assets. In addition, Capco's deep expertise in blockchain technology and the digital asset marketplace provides comprehensive know-how around the opportunities and challenges of asset tokenization including design, embedding into value chains, risk management and regulatory alignment.
With these capabilities, Capco competently supports financial institutions in designing and implementing scalable end-to-end operating models that add value, strengthen compliance, enhance operational resilience and anticipate future regulatory developments around asset tokenization.
Contact us to discuss how our experts can assist you in safely navigating asset tokenization requirements to gain compelling business advantages through this emerging paradigm shift in banking and financial markets.
References
[1] https://www.dtcc.com/press-releases/2025/paving-the-way-to-tokenized-dtc-custodied-assets
[4] https://www.lseg.com/en/media-centre/press-releases/2026/london-stock-exchange-to-launch-lse-24
[5] https://genfinity.io/2026/07/22/london-stock-exchange-lse-24-overnight-trading-venue-2027/
[8] https://www.esma.europa.eu/esmas-activities/digital-finance-and-innovation/dlt-pilot-regime
[9] https://finance.ec.europa.eu/news/dlt-and-tokenisation-paving-way-internet-value-2026-04-21_en
[10] https://www.dtcc.com/news/2026/may/04/dtcc-advances-development-of-new-tokenization-service
[12] https://www.capco.com/intelligence/capco-intelligence/crypto-asset-reporting-framework
[13] https://www.taxbit.com/carf/implementation-tracker
[15] https://www.sec.gov/rules-regulations/self-regulatory-organization-rulemaking/sr-txse-2026-015
[16] https://www.sif.admin.ch/en/dlt-blockchain-en
[17] https://www.sif.admin.ch/de/dlt-blockchain
[18] https://www.mas.gov.sg/regulation/guidelines/guide-on-tokenisation-of-cmps
[20] https://apps.sfc.hk/edistributionWeb/gateway/EN/circular/doc?refNo=26EC22
[22] TDS on payment for the transfer of Virtual Digital Assets (VDAs) and Taxation of Virtual Digital Asset (VDA)
[23] https://www.in.kpmg.com/taxflashnews/KPMG-Flash-News-Draft-Income-tax-Rules-2026-2.pdf
[24] https://www.pwc.com/jp/en/taxnews-financial-services/assets/fs-20251224-en.pdf
[25] https://kpmg.com/kpmg-us/content/dam/kpmg/taxnewsflash/pdf/2026/04/tnf-fatca-japan-apr-6-2026.pdf
[27] https://www.elibrary.imf.org/view/journals/068/2026/001/article-A001-en.xml
[28] https://www.six-group.com/dam/download/sites/swiss-sptc/t1/swiss-sptc-t1-recommendations-paper.pdf
[29] https://www.esma.europa.eu/publications-and-data/interactive-single-rulebook/csdr-0
[30] https://www.iosco.org/library/pubdocs/pdf/IOSCOPD809.pdf
[32] https://doi.org/10.1787/c033401a-en
[33] https://www.ecb.europa.eu/press/key/date/2026/html/ecb.sp260323~a88f20c049.en.html
[34] https://www.bis.org/fsi/fsisummaries/exsum_23905.htm
[35] https://www.ecb.europa.eu/press/fie/box/html/ecb.fiebox202605_05.en.html