BlogMainAdoption and Opportunity in Tokenized Finance: A Strategic Outlook for the Next 12-18 Months With regulatory landscapes rapidly evolving to accommodate on-chain money and assets, the financial services industry is approaching a significant turning point. As regulated on-chain currencies like stablecoins, tokenized deposits, and central bank digital currencies (CBDCs) begin to gain traction in key international finance hubs, tokenized finance stands on the verge of critical expansion. Major regulatory initiatives across regions like Hong Kong, Singapore, Japan, the UK, and the Middle East are helping to shape a future where tokenized financial services become mainstream, potentially achieving a notable inflection point in the next 12–18 months. (See Exhibit 12.)Adoption and Opportunity in Tokenized Finance: A Strategic Outlook for the Next 12-18 Months

A Flywheel Effect for Tokenized Fund Growth

Tokenized finance has gained momentum with an estimated $290 billion in existing demand for tokenized funds among virtual asset owners, alongside trillions of dollars anticipated to flow into tokenized assets as traditional financial institutions adopt on-chain money. This convergence of stablecoins, demand for virtual assets, and the growing market of crypto foundations is expected to generate a near-term flywheel effect in tokenized fund adoption. With benefits similar to exchange-traded funds (ETFs), tokenized funds have the potential to drive a major transformation in the investment sector. Notably, ETFs reached 1% of total fund assets within seven years of the launch of the first ETF in 1993. Tokenized funds could follow a similar trajectory, potentially capturing 1% of total assets under management by 2030—approximately $600 billion. This projection may increase further if simple, low-friction conversion paths for existing mutual funds and ETFs are established. (See Exhibits 13 and 14.)

Dual Pathways to Tokenized Fund Growth

Two primary pathways exist for the expansion of tokenized funds. First, asset managers can launch new tokenized investment vehicles, aimed at appealing to emerging investor pools. This approach enables managers to engage a broader demographic, especially those increasingly interested in digital assets. Second, private and public sectors can collaborate to identify effective ways to upgrade existing fund vehicles into tokenized forms. This approach requires fewer structural changes and can help fast-track adoption. By focusing on these two growth paths, the industry can potentially make fund tokenization more accessible, cost-effective, and scalable. (See Exhibit 14.)

Essential Collaboration for a Frictionless Financial Revolution

Achieving widespread adoption of fund tokenization depends heavily on orchestrating an effective ecosystem. Key to this endeavor is setting a universally accessible vision for financial services, one that incorporates foundational capabilities, critical use cases, and pathways to reduce friction in the adoption process. These initiatives will echo the early development of ETFs, where concerted efforts across the financial sector created robust infrastructure and standards. To build an enduring ecosystem, institutions will need to work with various stakeholders—market makers, distributors, asset managers, and regulators—to develop products, adapt technologies, and form strategic partnerships that address both current and future market needs.

The Importance of Global Standards and Industry Collaboration

For tokenized funds to fulfill their potential, alignment on a global scale is essential. Setting universal standards can help foster legitimacy, ensure connectivity across different infrastructures, and promote interoperability across regions. Some of the most critical areas for collaboration include:

Operational Standards for Tokenization: Cross-jurisdictional operational standards are needed to allow for seamless fund distribution. To accomplish this, regulatory bodies and institutions could leverage existing agreements like Mutual Recognition of Funds to simplify compliance, reduce operational costs, and encourage the expansion of tokenized products. Consistent controls across regions can enhance the security of tokenized funds, simplifying compliance for entities involved in global distribution.

  • Clarity in Tokenized Fund Regulation: Establishing consistent guidelines for AML/KYC compliance, digital asset security, and operations within the tokenized ecosystem is vital. Defining qualifications for tokenized fund management and developing safeguards for investor interests will build trust and ensure transparency. These standards will help streamline regulatory compliance and operational efficiency across borders.
  • Operational Standards for Tokenization: Cross-jurisdictional operational standards are needed to allow for seamless fund distribution. To accomplish this, regulatory bodies and institutions could leverage existing agreements like Mutual Recognition of Funds to simplify compliance, reduce operational costs, and encourage the expansion of tokenized products. Consistent controls across regions can enhance the security of tokenized funds, simplifying compliance for entities involved in global distribution.
  • Technical Interoperability Across Blockchain Networks: Establishing common cross-chain standards for blockchain interoperability is crucial for tokenized funds, particularly when they span multiple blockchains. These standards would allow essential smart contract features—such as secondary transfer controls and collateral management—to remain effective across networks. Risk-based cybersecurity protocols will further support the infrastructure needed for a global, interconnected tokenized financial system.

Toward a Universally Accessible Financial Ecosystem

Tokenized finance represents an opportunity for the financial industry to redefine itself for the digital age. As the sector navigates this transition, a universally accessible framework will be essential. Institutions must collaborate with both private and public stakeholders to establish standards, protocols, and regulatory frameworks that ensure seamless integration across borders and jurisdictions. Echoing the ETF boom, a tokenized finance ecosystem will thrive through proactive engagement, adaptive technology, and robust partnership networks.

Tokenized funds have the potential to reach transformative scale, reshaping asset management and making global financial markets more accessible, efficient, and secure. With $290 billion in current demand and the potential for trillions more, tokenized finance offers a promising future for the financial services sector.