Tokenised trading of traditional assets via blockchain is taking longer than expected, executives say

By creating tokenised assets - usually blockchain-based tokens to represent holdings of mainstream assets such as currencies or bonds - banks hope to make it more efficient, faster and cheaper to trade, and easier to record who owns want.

Banks that have long discussed creating "tokenised" versions of assets such as bonds and currencies say a shift to blockchain-based trading is taking longer than expected, with some investors wary of the concept.

By tokenising assets - typically creating blockchain-based tokens to denote holdings of mainstream assets like currencies or bonds - banks aim to make them faster, cheaper and easier to trade, and to record ownership.

Consultants and digital asset executives predict a large proportion of the world's assets will be tokenised via blockchain - HSBC and Northern Trust said in a note last year they expected 5% to 10% of all assets by 2030.

But executives speaking at the Money20/20 fintech conference this week said the shift to digital versions of assets was happening slowly.

"It's taken longer than I expected, to be honest, to get to the point where we are in this space," said Ryan Rugg, Head of Digital Assets for Citibank's trade and treasury solutions business at the Amsterdam event.

"We've done some experimentation in money markets and bonds but nothing that's live and scaling at the moment, the only application that we have live is a tokenised deposit."

Despite this, Rugg said she was still excited by tokenisation, with the aim to have a tokenised deposit that can be sent 24/7, 365 days a year, avoiding cut-offs in different timezones or for banking holidays.

Clients are asking for it and the token has been live since last year, she added.

While there have been several experimental projects - for instance, to create blockchain-based bonds - tokenised trading lacks a liquid secondary market.

Having spent seven years trying to re-build its software platform around blockchain, Australia's stock exchange eventually "paused" the project and said last year the upgrade would no longer involve the technology.

Monica Long, president of U.S. crypto firm Ripple, told Reuters that many U.S. banks have "put digital asset services a bit on hold".

Ripple last year acquired crypto custody firm Metaco and Long said it was going well - highlighting a recent partnership with HSBC.

One of the main hurdles to trading traditional assets via blockchain is that banks are each developing their own networks, executives said, making it hard to trade across platforms.

"This fragmentation slows down adoption, as investors don't want to connect to dozens of different networks," said Julien Clausse, head of BNP Paribas' digital asset platform AssetFoundry ahead of the event.

"Most likely, we will continue to operate in a hybrid world for years to come, with some domains being more actively tokenised because of the perceived benefits, and some others remaining in a the traditional world," Clausse said.