TL;DR
Background: The on-chain actions of traditional financial institutions have officially entered the "infrastructure-level deployment" stage, moving from "pilot exploration".
Journey: Private chain → Public chain integration | Experiment → Production-level deployment | Technology-driven → Compliance-driven
Framework: Tokenized deposits/funds, trading and settlement, corporate action automation, collateral and custody system on-chain throughout
Ecology: Banks, asset management, clearing institutions, exchanges, custodians, and infrastructure providers entering together
Risks: Interoperability fragmentation | Regulatory uncertainty | High integration costs | Security still needs verification | Institutional adoption inertia
Opportunities: Large market scale expansion space | Efficiency dividends are certain | Emergence of new financial product forms | Lower barriers to investor access
Conclusion: The focus of competition is not "whether to go on-chain", but who can occupy a core position in the new infrastructure.
The on-chain actions of traditional financial institutions have officially entered the "infrastructure-level deployment" stage, moving from "pilot exploration". This is not just a simple technology trial, but a fundamental restructuring of the global financial system: settlement has been shortened from T+2 to real-time, funds have changed from static deposits to programmable assets, and cross-border payments have been transformed from days of waiting to minutes of completion. Ordinary investors may not have fully felt it yet, but this revolution is quietly reshaping the rules of the game in wealth management, payment settlement, and asset allocation.
1. Background and Motivation: Why do traditional financial institutions want to go on-chain?
It has long been a public secret that the efficiency of the traditional financial system is low. Stock settlement T+2, government bond transactions requiring manual reconciliation, cross-border remittances taking 3-5 days, and layered handling fees... According to a joint report by the Boston Consulting Group (BCG) and Ripple, the implicit costs caused by inefficient settlement globally reach hundreds of billions of dollars annually. Blockchain provides a "real-time, programmable, transparent" solution:
Real-time settlement: On-chain transactions can achieve T+0 or even instant finality, reducing counterparty risk.
Programmability: Smart contracts automate corporate actions (dividends, redemptions), collateral management, and reduce human error.
Enhanced liquidity: 24/7 trading allows fragmented assets to circulate globally.
Cost compression: Reduced intermediary steps; according to JPMorgan's estimates, institutional payment costs can be lowered by over 80%.
New business scenarios: The combination of tokenized deposits + stablecoins can create "bank-grade" on-chain currency, capturing the trillion-dollar blue ocean of DeFi and TradFi integration.
Regulatory loosening and competitive pressure: The 2025 U.S. GENIUS Act outlines frameworks for stablecoins and tokenized products, the European MiCA legislation is implemented, and the Hong Kong HKMA Ensemble project and Singapore's Project Guardian provide sandbox support. These policy signals have shifted financial institutions from "wait and see" to "race ahead". Larry Fink, CEO of BlackRock, stated in a 2026 outlook: tokenization will be a "turning point for the global market", equivalent to the internet of 1996.
For ordinary investors, this means: in the past, they could only buy traditional money market funds, but now they can obtain similar returns through on-chain products while enjoying real-time liquidity; corporate treasury management has shifted from "bank window" to "on-chain wallet," significantly improving fund utilization.
2. Development Process of On-chaining Traditional Finance
The on-chaining process of traditional financial institutions is not a short-term explosion, but a gradual evolution path spanning a decade. Its essence is the migration of financial infrastructure from a "closed system" to a "programmable open network".
(1) Seed and Validation Period (2015–2020) — "Can it be done?"
The core keyword of this stage is proof of concept, during which financial institutions remain highly cautious. JPMorgan launched the Onyx platform based on a consortium chain in 2016 (later evolved into Kinexys) to test inter-institutional payment and settlement efficiency; Ripple partnered with several banks to create a cross-border settlement network to verify the feasibility of distributed ledgers in international remittances; technology providers such as Consensys and Chainlink promoted enterprise-level blockchain pilots.
Overall, this stage is still limited to private chains or consortium chain environments, with limited business scale, mainly solving the "whether the technology is usable" problem, rather than commercial landing.
(2) Early Explosion of RWA (2021–2023) — "Can it be scaled?"
With the maturity of the DeFi ecosystem and heightened institutional awareness, on-chaining began to enter the landing stage of real-world assets (RWA). Franklin Templeton launched the BENJI on-chain fund, achieving the first issuance and circulation of traditional fund shares on a public chain; multi-chain deployments began to emerge, marking that assets are no longer limited to a single chain environment; institutions began to explore paths for "on-chain + compliance" integration.
The hallmark turning point of this stage is: assets are truly "on-chain," rather than just doing accounting simulations on-chain.
(3) Acceleration Transformation Period (2024–2025) — "Can a closed loop be formed?"
In 2024, the on-chaining witnessed a critical leap, driven by the gradual clarification of regulations (such as the U.S. GENIUS Act and European MiCA) and the maturity of technological infrastructure (Layer2, cross-chain protocols). Against this backdrop, on-chain finance began to form a complete closed loop:
Asset Side: Tokenized government bonds, funds, deposits;
Payment Side: Stablecoins, tokenized deposits;
Infrastructure Side: Clearing, custody, collateral management on-chain.
Typical cases include: Societe Generale in Europe issued compliant stablecoins through SG-FORGE and integrated into Deutsche Börse's clearing system; the Hong Kong Whale platform facilitated HSBC and Standard Chartered to achieve real enterprise fund transfers on-chain; the U.S. banking system began testing public chain-based stablecoins and tokenized deposits. The essence of this stage is: on-chain finance has moved from "point applications" to "system engineering."
(4) Infrastructure-Level Deployment Period (2026 to Present) — "Will it become the new standard?"
2026 marks the entry of on-chaining into a true "production-grade era." Key characteristics include:
Core financial infrastructure goes on-chain: DTCC promotes the government bond tokenization system;
Multi-chain deployment becomes standard: BlackRock's BUIDL has expanded to multiple public chain ecosystems;
Banks originally participate in public chains: JPMorgan's tokenized deposit (JPMD) directly supports Base and Canton Network;
Market size rapidly climbs: The RWA non-stablecoin scale rose from approximately $14 billion at the beginning of 2025 to about $27.5 billion, with a significant increase in institutional share.
The core change of this stage is that: blockchain is no longer an "external tool," but has become part of the financial system itself.
Looking back on the entire development path, it can be abstracted into three key main lines:
From private chain → public chain integration: Early emphasis on closure and control, now gradually turning towards open networks and interoperability;
From experiment → production-level deployment: Transitioning from PoC verification to real funding flows and core business carrying;
From technology-driven → compliance-driven: Embedding KYC/AML, regulatory sandboxes, and audit systems, making on-chain finance institutionally grounded.
3. Current Status and Representative Cases of On-Chaining Traditional Finance
The on-chaining actions of traditional financial institutions are not a simple technical overlay, but a reconstruction of the underlying logic of the financial system. The on-chain reconstruction of deposits/funds and trading and settlement is just the starting point; blockchain is penetrating fully into the operational backend, risk management backend, and custody backend, forming a closed loop.
1. Tokenization of Deposits/Funds
This direction is the "capital foundation" of on-chaining, focusing on converting traditional bank deposits and money market funds into 1:1 pegged blockchain tokens, supporting real-time transfer, automation execution, and around-the-clock liquidity.
According to RWA.xyz latest data, the value of RWA on-chain assets has reached $27.5 billion, with over 700,000 holders, nearly doubling since early 2025; among them, the scale of tokenized U.S. government bonds has exceeded $12.86 billion, an increase of over 120%. BlackRock's BUIDL fund, JPMorgan's Kinexys platform, tokenized deposits from the Hong Kong Whale platform, and the upcoming government bond tokenization service from DTCC... these once "pilot projects" have now become part of the core infrastructure of traditional financial institutions.
Source: https://app.rwa.xyz/
Representative Cases:
JPMorgan Kinexys/JPMD: JPMD tokenized deposits are 1:1 pegged to bank deposits, supporting automatic issuance, transfer, and redemption, while still accruing interest. By 2026, it had natively deployed on the Base public chain and Canton Network, achieving real-time multi-currency settlement between institutions, with daily transaction volumes exceeding $2 billion, cumulatively over $15 trillion.
BlackRock BUIDL Fund: Tokenized money market fund, underpinned by U.S. government bonds and cash equivalents, with annualized returns of about 3.5-4%. Expanded in early 2026 to five public chains: Polygon, Arbitrum, Avalanche, Optimism, and Polygon, supporting 24/7 trading and collateral usage, with a scale exceeding $2.2 billion, accounting for nearly 20% of the tokenized government bond market.
Franklin Templeton BENJI Fund: Operating on multi-chains like Stellar, Ethereum, Polygon, and Solana, with a management scale exceeding $580 million, supporting daily dividends and compliant trading.
Hong Kong Whale Platform: Collaborating with HSBC, Standard Chartered, and Ant Group, by the end of 2025, it achieved real-time cross-bank transfers of HKD/USD/RMB offshore/tokenized deposits (single transfer of HKD 38 million), allowing corporate wallets to transfer funds 7×24.
Societe Generale SG-FORGE CoinVertible: MiCA compliant euro/USD stablecoin (essentially an extension of tokenized deposits), embedded in Deutsche Börse Clearstream, used for collateral management and securities settlement.
2. On-chain Reconstruction of Trading and Settlement
The reconstruction of trading and settlement focuses on blockchain upgrades of exchanges and clearing infrastructures, achieving round-the-clock trading, instant (T+0) settlement, and stablecoin financing.
Source: https://developer.payments.jpmorgan.com/
Representative Cases:
NYSE Digital Trading Platform: Announced on January 19, 2026, the independent development of a tokenized securities platform, supporting 24/7 trading and instant on-chain settlement of U.S. listed stocks and ETFs. In March 2026, partnered with Securitize, which serves as the digital transfer agent responsible for minting blockchain-native securities. Collaborating with banks like BNY Mellon and Citi to integrate tokenized deposits into clearing fund management, achieving atomic-level DvP (Delivery versus Payment).
DTCC Canton Network Government Bond Tokenization: MVP launched in the first half of 2026, providing tokenization services for U.S. government bonds held in DTC custody. As the world's largest securities depository, this move directly transforms trillions of dollars of liquidity into programmable assets.
Nasdaq Tokenized Stock Rules: Partially approved by the SEC, allowing tokenized versions of stocks to trade in parallel on existing exchanges.
This reconstruction transforms institutional trading from "workday T+2" to "global real-time," significantly reducing counterparty risks and capital occupancy.
3. Automation of Corporate Action Processing and Asset Services
According to data from the U.S. Depository Trust and Clearing Corporation (DTCC), traditional corporate action (dividends, voting, mergers and acquisitions) handling costs reach $58 billion annually; blockchain + AI can achieve data standardization and real-time distribution.
Representative Cases:
Chainlink Global Industry Initiative: Involving 24 institutions, including Swift, DTCC, Euroclear, UBS, DBS Bank, BNP Paribas Securities Services, etc. AI extracts structured data from announcements, verified by Chainlink CRE, then converted to ISO 20022 standards and cross-chain distributed to traditional systems and on-chain smart contracts, achieving minute-level delivery.
Source: https://blog.chain.link/
4. Collateral Management and Cross-Border Liquidity Optimization
The current utilization rate of collateral (government bonds and other HQLA) is very low; blockchain can upgrade the traditional interbank "borrowing + collateral" operations into real-time, cross-border, round-the-clock, programmable smart trading.
Representative Cases:
Canton Network Industry Working Group: Involving DTCC, LSEG, BNY Mellon, Societe Generale, etc., achieving cross-border intraday repo (including tokenized UK Gilts vs. non-GBP deposits). Supporting multi-asset, multi-currency, 24/7 collateral reuse, with the core aim of waking up the $300 trillion of quality assets from a "sleeping" state, allowing faster, more flexible, and cost-effective liquidity and collateral for financial institutions.
5. Expansion of Digital Asset Custody Services: Bank-level Crypto Asset Custody
Traditional custodial banks will incorporate Bitcoin and others into existing platforms, achieving unified reporting, tax, and KYC.
Representative Cases:
Citi: Plans to officially launch institutional-grade Bitcoin custody within 2026, integrated into traditional custody systems.
BNY Mellon: As the world's largest custodian bank, has already effectively provided Bitcoin custody services, supporting secure storage and transfer for institutions.
Tokenization of deposits/funds, reconstruction of trading and settlement, automation of corporate actions, collateral optimization, and digital asset custody are interwoven across five dimensions, collectively building the new blockchain infrastructure for traditional finance. By 2026, these actions have entered the production-level collaborative phase, with estimates suggesting a release of $2-10 trillion in efficiency dividends by 2030.
4. Challenges and Opportunities: Structural Constraints and Long-Term Space
After traditional finance's on-chaining enters the infrastructure phase, its development is no longer dependent on "whether it is feasible," but on "whether it can be scaled and standardized." Currently, constraints and opportunities coexist.
1. Main Challenges: Structural Constraints
(1) Interoperability and Liquidity Fragmentation: The parallel development of multiple chains has led to fragmented asset distribution, making liquidity aggregation difficult. Cross-chain protocols (such as CCIP, LayerZero, etc.) provide solutions but remain in the early stages regarding security and standard unification.
(2) Regulatory and Compliance Uncertainty: Different jurisdictions still have discrepancies in stablecoins, tokenized assets, and on-chain settlement rules. Core issues include:
Legal confirmation of on-chain assets
Transaction reversibility and asset freezing mechanisms
Embedding KYC/AML into on-chain environments
(3) High Integration Costs of Traditional Systems: Structural differences between banks' core systems (Core Banking), clearing systems, and blockchain result in high renovation costs and long cycles, with high requirements for technology and compliance teams.
(4) Liquidity and Security Still Need Verification: Overall liquidity of RWA on-chain assets is still limited compared to traditional markets; at the same time, smart contract vulnerabilities and cross-chain bridge risks remain major security concerns.
(5) Institutional Adoption Inertia: Some traditional financial institutions still classify on-chain assets as high-risk categories in their risk models; internal approval and risk control processes are not yet fully adapted.
2. Key Opportunities: Long-Term Drivers
(1) Clear Market Scale Expansion Space: Several institutions (BCG, Standard Chartered, etc.) predict that by 2030, the scale of tokenized assets is expected to reach several trillion dollars. In the global fixed income market of approximately $130 trillion, just a 1% on-chain penetration rate corresponds to a trillion-dollar increment.
(2) Efficiency Dividends are Certain: On-chain settlement can significantly reduce cross-border payment costs and time delays:
Settlement Costs: Decrease by about 50%-80% (depending on the scenario)
Fund Turnover Efficiency: Increase by 20%-30%
(3) Emergence of New Forms of Financial Products: The fusion of tokenized deposits and stablecoins creates "on-chain bank currency," on-chain funds support 24/7 liquidity and collateral, and smart contract-driven trade financing and asset management.
(4) Lower Barriers for Investor Access: On-chain RWA allows individual investors to directly participate in assets that were previously only available to institutions (such as government bonds and money funds), enhancing global asset allocation efficiency.
It can be seen that the core of on-chaining is not "putting assets on-chain," but rather restructuring the clearing layer and capital flow mechanisms. Its essence is to replace traditional decentralized intermediary systems with programmable infrastructure.
5. Outlook and Conclusion: From Asset On-Chaining to Programmable Financial Systems
Looking ahead to the years 2026–2030, on-chaining will move from "point applications" to "systemic infrastructure," showing the following three major trends:
Continuous Advancement of Full Asset Tokenization: The tokenization scope will expand from the current government bonds and deposits to stocks and ETFs, private credit and structured products, real estate and commodities, etc. With the participation of DTCC, exchanges, and custodians, the on-chain mapping of traditional assets will become standard.
Deep Integration of DeFi and TradFi: DeFi is evolving from "yield-driven" to "asset quality-driven": RWA will become core collateral, while stablecoins and tokenized deposits reconstruct the payment system, with on-chain interest rates gradually anchored to real interest rates. This means DeFi will gradually embed into the traditional financial structure rather than existing independently.
Intensified Regional Regulatory and Financial Center Competition: Different regions are gradually differentiating in their positioning within on-chain finance: U.S.: Leading position with rapid growth potential post-regulatory clarity; Europe: MiCA promotes compliance standardization; Hong Kong and Singapore: Advantage in regulatory sandboxes and cross-border finance. Regional differences will directly affect the deployment path of on-chain financial infrastructure.
Conclusion
The on-chaining of traditional financial institutions is transitioning from "pilot exploration" to "production-grade deployment." Its significance lies not in simply moving finance onto blockchain, but in: reconstructing clearing and settlement mechanisms, improving fund flow efficiency, and achieving programmable management of assets. Under the premise of gradually clarifying regulations, the credit systems of traditional finance and the efficiency advantages of blockchain technology are merging to form a new financial infrastructure. This process is more akin to a long-term system evolution rather than a short-term technological replacement. In the future, the focus of competition will no longer be "whether to go on-chain," but rather who can occupy a core position in the new infrastructure.
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