Bank tokenization: Choosing between wrapping & originating - Capital

The tokenization market has shifted its primary focus from unlocking liquidity in illiquid assets to enhancing settlement efficiency for liquid instruments like repo, collateral, and money market funds. Citi Institute projects the tokenized asset market could reach $5.5 trillion by 2030, though current estimates vary significantly based on whether they include illiquid alternatives or only instruments with functioning two-sided markets. Excluding stablecoins, the tokenized financial asset market is currently valued at approximately $27 billion, reflecting a fourfold increase over the previous year. Institutional adoption is accelerating, evidenced by J.P. Morgan’s Kinexys settling over $1.5 trillion cumulatively and Broadridge’s DLR platform processing $354 billion in average daily volume during Q3 FY26. Despite this growth, Pantera Capital’s data indicates that 77.6% of tokenized assets are merely "wrappers" that function as digital twins rather than native on-chain products. This "newspaper-on-a-website" phase persists because wrapping minimizes regulatory friction and preserves existing custodial and legal operating models. As global regulators like the SEC and EU authorities clarify the legal status of tokenized securities, the industry is moving toward a three-layer monetary stack of stablecoins, tokenized deposits, and tokenized money market funds.