Tokenization is not a threat to traditional finance – it is the future

May 30th Tokenization is not a threat to traditional finance – it is the future

By Jesse Knutson, Head of Operations at Bitfinex Securities

_{This article was originally posted Wealth Breeze}.

Beyond noise, volatility and price fluctuations in cryptocurrency markets are tokenized securities, a new asset class equipped with underlying technologies associated with cryptocurrencies such as Bitcoin.

Physical and financial assets from real estate to US Treasury bills can be tokenized using blockchain technology. This means that a digital representation of the asset is created and can be safely exchanged in real time among investors.

Some areas of capital market infrastructure are resisting technological changes in the Internet age. Conversely, major financial markets require central deposits, delayed settlements and limited trading times.

Tokenization is the first true opportunity for the world to rethink, modernize and do things differently for generations to do so. For decades, governments, businesses, individuals, especially emerging economies and industries, have struggled to access capital through legacy markets and organizations. Tokenization actively removes these barriers and changes the global landscape of both the issuer and investors of such assets’ capital.

Issuers are given a more direct link to investors, creating significant operational efficiency and cost savings, and investors are much more flexible and more free to use.

Why do assets become tokens in the first place?

Tokenized assets are digital representations called “tokens” of underlying assets listed on a regulated platform. Tokenized bonds, for example, retain all traditional bond characteristics such as principals, interest rates, and maturities, but are issued, expressed and traded using blockchain technology, rather than paper certificates or centralized electronic records like traditional counterparts.

A blockchain is a secure, distributed ledger that stores records across a network of multiple computers. This allows issuers and investors to see real-time ownership, payment history and asset performance. This level of transparency reduces information asymmetry. This is a key driver of fear and volatility for investors in the dark market that are often popular recently.

Intermediation also ensures that investors seeking to reassign capital can do so through immediate settlements or transactions in the liquid secondary market.

Identify opportunities in tokenized markets

To see how these tokens behave in the current market, there are tokens that invest in short-term US financial bills that have not been particularly affected by recent market volatility. In fact, as of April 1, 2025, the US Treasury’s total market capitalization was $5.12 billion. On May 20, 2025, this figure was located at $70 billion, representing a 37% increase despite the tariff saga (1).

These tokens can attract investors who may normally struggle to access the US Treasury directly due to geographical restrictions. With fewer minimum tickets to invest in the primary market, retail and institutional investors can access and even trade these assets in the secondary market.

Meanwhile, small to medium-sized governments and businesses issue compelling tokenization securities that are accessible to investors of all kinds of different types. Some of them offer coupons with returns of 8% to 15%, typically with maturities of less than five years.

Thoughtful innovation overturns unfounded skepticism

It is no secret that some segments of the traditional financial world remain skeptical about tokenization.

Despite real-world examples of successful tokenized issuance, voice opponents continue to express skepticism about the slow absorption of unexpected tokenization in today’s financial markets. (2).

While some agencies and regulators remain in “wait and see” mode, concerns about the feasibility and complexity of blockchain have been raised by others.

Although there is no perfect technology system, it cannot be ruled out that blockchain functionality and the possibility of modernizing global capital markets.

For example, in the US, pressure is increasing, including things like Larry Fink, to ensure that the SEC introduces clear rules and regulations for tokenized securities (3). This could happen during President Trump’s term, and if so, it could provide a catalyst for the exponential growth of tokenized securities.

Tokenization provides an opportunity to update the technology behind capital markets and increase access to capital across the world. Blockchain is not a problem, but is perfect for its purpose of leveraging the benefits of tokenization and providing the scale, efficiency and privacy management needed to provide alternative investment opportunities to make investors stand out.

There is much to learn from the old world new, financial markets, regulators and policymakers.