Why tokenization is gaining momentum

[Music]

Hannah Elson: Welcome to J.P. Morgan's Making Sense. I'm Hannah Elson. I'm the global head of Custody and the EMEA head of Securities Services. And I'm joined today by Oli Harris who leads Kinexys, J.P. Morgan's comprehensive blockchain offering. Oli, it's great to have you with us.

Oli Harris: Thanks, Hannah. It's great to be here.

Hannah Elson: Oli, today we're going to talk about tokenization and digital assets, and what is seemingly feeling very different, versus, perhaps, where we were a few years ago. Tokenization and digital assets have been a topic of discussion across the industry for a number of years now. But we are starting to see a real shift from pilot programs to much more scalable solutions, with regulatory development happening much quicker and institutional adoption also increasing. I think what feels different now is that institutions are increasingly using tokenization to address real liquidity, settlement, and operational challenges, giving the market stronger foundations for continued growth. So, Oli, I guess if you had to summarize what's fueling the increased adoption and focus on tokenization over the last 18 months or so, what would you point to?

Oli Harris: Yeah, I think the single word I would use is convergence. This time round, it's not about crypto price speculation nor is it about hype around any one asset. It's being driven by genuine market structure transformation, where participants, assets, and cash are finally coming together on the same rails to drive real commercial outcomes. The second driver we're seeing is regulatory clarity. Policy direction has sharpened in several major markets. And that is what gives institutions the confidence, as you rightly said, to stop piloting and start moving into production. The third and the one people underestimate is the cash leg. On-chain money is becoming credible through regulated forms, like tokenized commercial bank deposits, such as our very own J.P. Morgan coin. And that matters enormously, because tokenized assets cannot scale without a trusted settlement asset and true delivery versus payment. No cash leg means no market. And all of this is landing at a moment when higher rates have put a hard price on idle liquidity. Trapped cash, collateral efficiency, settlement timing, and balance sheet optimization are senior management and board level concerns, which is exactly why cross-border, always-on, multicurrency settlement has gone from a niche idea to a commercial imperative. For us at Kinexys, none of this changes our long-term thesis. It just means that the market is validating our ideas faster because the whole ecosystem is now coming on chain at the same time.

Hannah Elson: Thanks, Oli. That all makes complete sense. A couple of other things I would add to that. I think the growth of stablecoins has also been a really strong factor at play here. It's not only fueled some of the growth and development in digital cash and payments that you touched on, but is also a driver now we're seeing of demand for tokenized yield generating products, like money market funds. And then I think the other area of development that we've seen as a bit of a driving force here is the emergence of new players in the ecosystem. So, fintechs that are increasingly getting expanded regulatory approval, so these could be crypto fintechs or crypto native fintechs. And becoming now, again, much more prominent players in the servicing space. And those aren't organizations that we were hearing about or talking about 12 months ago, but most of our clients will now understand what a tokenization or securitization service is. So, I think that emergence of stablecoins have also been really big contributors to that.

Oli Harris: Building on those themes, you know, what are you hearing from clients in the securities

 services and custody space? And are there any sort of global or segment trends that would be helpful for our audience?

Hannah Elson: Yeah. Oli, I would say, the main trend we're seeing is really from our asset manager clients who are very much focused on launching tokenized money market funds. And they're seeing that as a means to tap into those blockchain-based investors, effectively a new distribution channel to provide an on-chain yield generating product to target some of those reserve stablecoin asset flows. We're also seeing potential development of use cases through tokenization for funds and money market funds to be used as collateral as well. Of course, we're seeing interest in tokenized equities and bonds, especially given some of the announcements that we've seen over the past year or so. U.S. and DTC sees plans to tokenize securities being one example. Also, here in the UK, the UK government has announced plans to issue a digital guilt. I think that's in quarter one next year. So, we're starting to see markets around the world, of course announce plans. And so, our institutional investor clients are keen to understand the timelines and what they should be doing or how they should be thinking about developing their capabilities and what they can expect from us as their service provider in terms of our own capabilities. Again, touching on liquidities, we're also now seeing some of our investor clients want to connect their custody accounts into blockchain deposit accounts or to have the ability to integrate into tokenized cash, digital cash solutions. And we're also starting to have some conversations as well on tokenized ETFs. Again, thinking about that as a potentially new, more simplified, efficient distribution mechanism. I mean, I would say generally across the board, whether it's our asset owner or asset manager clients, and pretty much anywhere that I go in the world, this is within the top three things that- that clients want to talk about. And for the most part, our clients are really just looking to understand what's going on, what's real, what's noise, what they should be thinking about, wanting to understand what their service providers are delivering for them. And so it's really been more of an education journey, I would say, outside of some of those specific use cases that I mentioned. So, Ollie, I'm going to turn back on you then. What are you hearing from clients and where are they focusing their efforts, particularly in the payment liquidity space? And also, are there any global or segment trends that you're seeing coming through?

Oli Harris: Yeah. I would say, in the payment space, two things come to mind. Clients coming to us for solutions on how to cut pre-funding requirements through smarter liquidity orchestration, netting, and on-demand financing, again, without giving up any resiliency, or risk control on their part. The second is 24/7, 365 cross-border movements of value. This is where clients are coming to Kinexys and looking for the ability to execute and confirm payments outside of local market hours, across both single currency and cross-currency corridors. And then combining that with predictable near real-time execution. And then looking for that full end-to-end transparency through the whole lifecycle of the payment. Then in the asset space we see demand for tokenized money market funds, bonds, and equities, as all areas of real interest. And what's striking is how FMIs in particular are now looking at how do we put in place throughout foundations to scale and evolve their market structure into, as we were saying, production grade systems. Whether it's the DTCC, New York Stock Exchange, its Parent ICE, and also The Clearing House in the U.S. and European CSDs, like Euroclear.

Hannah Elson: So listening to that, liquidity, efficiency, faster settlement, collateral mobility, it all links back to a broader challenge that firms face: Expanding into new markets whilst maintaining control and scalability. As clients grow across jurisdictions, they don't see tokenization as a technology project, but more evaluating how it can help them operate globally at scale, because global expansion exposes fragmented liquidity, differing settlement timelines, more intermediaries, and growing operational complexity. If assets and cash and collateral can move more efficiently across markets, operating models can simplify and capital efficiency can improve and all of that helps firms enter new markets and scale with more confidence.

Oli Harris: Indeed, yeah, building on that, expansion often exposes friction that is far less visible at a domestic level. We see treasury teams may grow internationally, finding themselves managing pre-funding requirements, multiple currencies, and around the clock payment flows all at once. That has always been the vision behind Connexus, is to help solve these pain points. To help clients move value globally with greater speed, transparency, and control. Delivering the infrastructure that can move money assets and information in near real time so that firms can unlock liquidity, reduce friction, and operate seamlessly across borders. So, Hannah, from a securities services and custodian perspective, what are you going to be focused on over the next year or two?

Hannah Elson: Yeah. Our strategy is to extend the services we support today to cover digital versions of the assets that we already service, securities, funds, and cash. We're planning a phase delivery of our digital asset solutions, which are aligned to our client drivers as well as market and regulatory developments. This will involve building out and enhancing our digital custody wallet and tokenization capabilities, as well as connecting to different platforms, including DTCC and relevant blockchains such as Ethereum. And of course, we are also deeply engaged in the various industry pilots, in regulatory consultations, and in working together across the industry to help define standards. So, turning back to you, Oli, where does Kinexys fit into that roadmap?

Oli Harris: Kinexys as J.P. Morgan's digital asset business plays a central role in that roadmap. We effectively run two things, a digital money business out of payments and a firm-wide platform business that supports all the other lines of businesses in delivering their digital asset strategies in one coherent way. Since 2015, J.P. Morgan has been building one of the earliest bank-led blockchain platforms. In production, we have transacted over four trillion to date, and we process approximately seven billion a day. On the payment side, Kinexys supports digital money through on-chain commercial bank money, for example, blockchain deposit accounts and our J.P. Morgan deposit token on public blockchains. We also support near real-time twenty four seven 365 transfers, both through the BDAs, the blockchain deposit accounts, and J.P. Morgan Coin, our deposit tokens. And we pair this with atomic on-chain near real-time FX settlement across eight major currencies, dollar, euro, sterling, Aussie, sing dollar, Hong Kong dollar, yen, and renminbi. On the platform side, Kinexys underpins J.P. Morgan's work on tokenized money market funds, collateral workflows, debt issuance, and other asset workflows where smart contract logic improves the operating model and unlocks commercial value for our clients. Our recent tokenized money market fund launches with asset manager clients show how tokenization is starting to extend what traditional fund structures can do, opening up new opportunities around collateral, liquidity management, operational efficiency, and investor access.

Hannah Elson: Great. So if we look forward, what do you see as the biggest opportunities and the biggest challenges that the industry needs to overcome? And where do you think we'll be in five years’ time?

Oli Harris: The strongest opportunities are in smarter treasury management and payments settlement first, which is where we see product market fit primarily today. Then over time, we do see collateral mobility, liquidity, and select securities workflows being unlocked through tokenization. The common thread is simple. It's making cash and assets work harder, but together by cutting idle time, manual cutoffs, and settlement friction. On the challenges, two things come to mind. The first is the interrelation between privacy, governance, and finality as we move away from only operating on private permissioned infrastructure, but connecting into public blockchains and away from what has historically been blockchain islands. And institutions need to know who can participate, who can see what, when is a transaction truly final, and how does value move across these networks so that we can fix fragmented liquidity? The second challenge is integration and user experience. Aside from a handful of well-built apps, blockchain is still hard to navigate for a traditional user, and connecting it into existing systems is harder still. So my belief is this technology is only going to scale when the user never has to think about the blockchain, and we need to abstract away the technology so that clients are only focused on the commercial outcomes. In five years, success is not going to look like a separate digital asset market. It will look like better financial infrastructure running quietly in the background, resilient, flexible, and largely invisible to the end user. And Hannah, is there anything else to add from a custody and post-trade angle?

Hannah Elson: So Oli, I think I'm going to touch on many of the same themes. But I think the primary opportunity from tokenization and blockchain is the potential for efficiency gains, which of course, are widely talked about, including more efficient use of collateral, programmable payments, a reduced need for separate ledgers and reconciliations to name a few. But to achieve these efficiency gains, there does need to be sufficient environment to enable activity on chain to be done at scale. And I think to get to this point, there are a couple of challenges to overcome. Certainly, we need to see continued improvement in regulatory and legal clarity globally. We also need to see interoperability between the different blockchains and platforms. And then, of course, liquidity, as you've talked about, Oli, we need to really see that cash leg on chain to support and enable true DDP settlement and all of the efficiencies that come from that. So given all of this, I think in five years' time, we are going to see more tokenized funds, securities, and cash than we do today. I do think this will shift in scale over time, but it's going to be dependent on how quickly the industry can overcome some of these challenges that we've discussed. Ultimately, though, I think in the next five years, custodians will be servicing a combination of traditional and digital assets on legacy and blockchain based rails. And our primary role will continue to be to safe-keep and service those assets, to provide liquidity, asset safety, and asset servicing, and ultimately, to still be that central point of connectivity and access to global markets, whether those are on blockchain or traditional rails. So wrapping up here, thank you for the great conversation, Oli, and thank you to our listeners for tuning in to this Making Sense podcast.

Oli Harris: Thanks so much for having me, Hannah.

[Music]

Voiceover: Thanks for listening to J.P. Morgan's Making Sense. If you've enjoyed this conversation, share your feedback by leaving a comment or review wherever you listen to podcasts. And be sure to follow our channel so you don't miss an episode!

This podcast is intended for institutional clients only. The views expressed in the podcast may not necessarily reflect the views of J.P. Morgan Chase & Co, and its affiliates, together J.P. Morgan, and do not constitute research or recommendation advice or an offer or a solicitation to buy or sell any security or financial instrument. Referenced products and services in this podcast may not be suitable for you and may not be available in all jurisdictions. J.P. Morgan may make markets and trade as principal in securities and other asset classes and financial products that may have been discussed. For additional disclaimers and regulatory disclosures, please visit www.jpmorgan.com/disclosures.

Copyright 2026 JPMorgan Chase & Co. All rights reserved.

[End of episode]