EN |Tokenized Capital Markets: Opportunities, Risks, & the Road Ahead | MERGE Madrid 2025

Good afternoon everybody. Thank you for attending. Thank you panelists for joining today. So we have quite an interesting panel to in front of you. Uh tokenized capital markets.

It's the financial system as we've been hearing over the last couple of days is on the edge of some sort of reset. Tokenization which was once kind of a fringe concept is now being championed by all the big Wall Street names from NASDAQ to S&P, Goldman Sachs, BNY Melon. They're all making moves in this space. Um, and I'm sure a lot of you saw last week Robin Hood CEO just called tokenization quote a freight train that is barreling through the traditional system. So clearly this isn't theoretical anymore.

This is happening and it's happening now. So today we'll explore where tokenization is creating real value, what's holding it back and how we move forward responsibly. We've got a great panel with us providing a mix of institutional banking technical and infrastructure perspectives. So panelists, just to kick off, I'd like to go down the row here and for you to each give a a quick introduction to who you are and what you do. Start here.

Sounds good. Happy to be here. Thank you for having me. Uh my name is Fabio. I've been building infrastructure for capital markets for the last five years and I've got to wear many hats whether that's setting up the genesis infrastructure for a layer 1 called choreium that is purpose-built for RWAs to lately uh building user and the user end application with a broker dealer called texture capital in the US to be and we are on track to be one of the first to launch a marketplace for tokenized stocks specifically US equities for users.

Um, so yeah, excited excited to be here and and discuss further on the topic.

Excellent.

Thank you. So, my name is Ishtan. I'm also very very happy to be here. I come from RIFE and Bank International in case you haven't heard. Uh, we are tier 2 regional bank in central and eastern Europe.

We're headquartered in in Vienna, Austria. We have uh 10 uh banks in the region in central and eastern Europe as universal banks. And in Vienna, Austria, we do serve institutional clients and corporates. I've been uh very happy to have joined the group's um groupwide competent center for for the blockchain technology. Um we've been doing a lot of uh um research market development observations a couple of uh proof of concept PC's in the past but now that there is regulatory clarity and I heard it pretty much from everybody who's coming from a bank that um now that there's this micro regulation we can really get our hands dirty so to say and and build up uh actual compliant products because we are in a very heavily regulated market in in the EU so we can only bring safe and sound and compliant products to our to our uh clients.

And I'm very excited to be working on now um a project where we focus on a tokenization of a a real world asset uh that we are hope to uh uh we hope to bring it to to our clients sometime in the middle of next year. Uh and um I'm really looking forward to the discussion around tokenization today.

Brilliant. Uh lovely to meet you all. So uh my name is Dottin Roman. I am the former uh head of digital assets technology and uh director of emerging technology at the London Stock Exchange Group of which I held that post for a number of years. But um as of the summer uh I've I've sort of stepped into a new role.

So I'm I'm running technology for a company called Acetera and we're a uh European regulated broker. Uh our focus is on solving for distribution for tokenized securities. It's great to meet you all today.

Thank you all. So let's start with some of the opportunities that we're seeing in the space these days and and where the tangible value is and and what are some of the real use cases if I can start with you. Uh you know we've heard the promise of tokenization for many years now but where are you seeing actual value today? What's working in your opinion?

Yes. Um I think that one of the really cool thing with with tokenization is that you can use this technology to um fractionalize assets, fractionalize real world asset. And this really creates the opportunity to build up new products especially new investment products for let's say typically high value assets. Think about now uh uh real estate. Think about now some art for example or or or highv value commodities that were not accessible to to masses not accessible to to bigger markets and now with having regulatory clarity on the one side and having the technology on the other side we can really uh build up cool new products.

So I see tremendous opportunity there. And following up on that, Doon, from your perspective on market infrastructure, what recent project or milestone really made you feel like this is finally happening?

It's it's a really good question. I mean, obviously, I was involved quite heavily in a lot of the digital asset work at the London S Exchange Group. We were building out uh a sort of end-to-end technology suite to digitize uh digital securities in a fairly agnostic way, solving for different use cases across both wholesale and retail. Certainly I think some of the big uh let's say uh sort of tent poles I think in the evolution and adoption of digital securities in the space has been obviously the NASDAQ and um NY announcements around tokenizing their entire listed book which I think is going to be fascinating and obviously they're working very closely with DTCC within that and I know they've been investing quite heavily in scaling out and building mature digital infrastructure. So I think we'll start to see real movement on the US side specifically in the wholesale space which is surprising to me because I was for for a very long time of the opinion that private markets is really going to sort of lead the charge for for for digital securities and we we do see that certainly in on the European side more broadly there's lots of initiatives around real estate you know private asset private funds and others and certainly we've been involved you know with Acetero and a with a number of projects that are looking to distribute those types of assets specifically so yeah it's a big focus for us at least

and we I'm curious that you brought up the point of kind of the the US uh environment versus the European market. I'm curious what you're seeing in the differences in those two markets um when it comes to tokenization these days.

Yeah. No, I think I think the sort of um anti-crypto view that had sort of dominated US politics for quite a long time probably slowed the sort of US market down quite a lot with respect to sort of the evolution of adoption of the technology. However, it's a big market. they're they're you know traditionally big drivers of innovation more broadly and so I think they'll catch up very very quickly obviously I think tokenization has been a very slow burn uh across Europe and and we've seen the fruits of evolution you know nevertheless you know solving for the cash leg has been sort of a big challenge I think that will be accelerated now with the genius act in the US uh and certainly I think Europe will start to sort of pick up the pace on solving for you know an accessible framework for stable coins and equally figuring out whatever it is they want to do eventually with CBDC's um but but no I think I think we're really going to start to see the worlds turn much faster

hopefully. And Fabio, I'd love your input in all this and and just get your thoughts on who's benefiting most thus far from tokenization. Is it institutions? Is it investors? Is it issuers?

I'm curious your thoughts. I

think the the real value that tokenization brings is to have both the asset ownership, right? The record of ownership and the value of the asset, the money on the same ledger. And right now that is not the case yet. So I think when once we get to the point where the infrastructure for this capital markets or any sort of value transfer um is on a on a blockchain then the beneficiaries are not just going to be the issuers but also uh retail in general. But what I see now I see a lot of adoption of tokenized funds and it it is definitely the institutional buying into tokenization as it's low risk and provides uh immediate value for for the banks or the institutions that that are of course it's in their best interest to um be able to reh rehypothecate an asset or you know improve settlement time and ultimately make more revenue.

But I think uh the value for regular users will come in the next five years. I don't think it's super tangible right now. But that's why we are working on tokenizing something like the stock market and really getting uh you know the NASDAQ for example has 60 million transactions a day and it's so it's it's a very difficult system to disrupt because it already works within all the complexities that it has like there's middlemen involved. um T plus one settlement across other you know steps that you have to take there. But my point is that once we get to that point is is when you unlock the real value for everyone across the board.

Definitely. So we've spent some time talking about the optimism, but let's talk about more of the reality and some of the risks associated with all of this. Um Dan, I'd love to start with you. As someone who's worked at exchanges, what's the biggest friction holding tokenized market back markets back? Is it the technology?

Is it the regulation? Is it the readiness? What are you seeing?

It's it's a really good question. I think in some respects all of the above. Um, you know, large organizations move very slowly. They're very riskaverse. Certainly, technology risk has been a material factor.

You've seen a strong hesitation for many of them to sort of really dive in and adopt public chains for obvious reasons. I mean, you know, many of these organizations are dealing with, you know, business flows with very very large very high value assets and very large scale and large volume transactions too. So you know within that world and and also you know in innately we recognize that securities are not bearer instruments like crypto assets. So you know there does need to be the considerations around sort of governance models and we started to see the emergence of that with sort of token standards like 3643 and 1400 but nevertheless you know regulatory pressure in terms of slowing down the sort of evolution and disruption of the technology has also been a factor. Um I I I I think yeah there's a lot there to to sort of t tackle with and grapple with and hence why I think a lot of the tangible evolution has sort of come from the more sort of grassroots startups fintexs um and then you're starting to see sort of the emergence of the larger players now as you know the sort of policy makers are getting more amenable to to to to these innovations and really helping to sort of encourage that growth and adoption.

Favio is fun do you have anything to add to that any other perspectives on what's holding everything back? Yeah, from my perspective, the technology part is easy. You know, in 2021, we had a fully working tokenized stock marketplace and and then the whole thing with the SEC happened. And I just think technology itself, right, like for the regulators, it's even appealing because there's more data integrity in a public or in a public blockchain. right now from a infrastructure perspective the risks in what I've seen ultimately come to C consu consumer protections right so like day-to-day users they're used to for example if they had fraud on their credit card or when they did a purchase they're used to having someone hold their hand right like they can call and dispute the charge and whatnot and they don't get that experience when they are trading with MetaMask on a DEX you know so I think that there's uh there's a middle point between those two worlds and banks do play a role in there.

Um so from a blockchain standpoint what we have focused on is in addressing these risk points at the protocol level. So for example if you're talking about uh chargebacks we have smart token clawbacks and we see other blockchains doing it too. when we talk about um messaging and just compatibility, we are we adopted the ISO 222 messaging just as a layer of communication with banking layers. Uh and then thirdly, I think um AML monitoring and and everything that pertains uh you know preventing fraud uh we're also addressing this. Uh there's companies like chain analysis and anchain.

ai AI that not only they analyze the data and try to predict this sort of fraud, but they they are building models that can automate this in the future. So yeah, I think that's that's all we could do is like address the risk from an infrastructure perspective. But but that's the main point and that's why we believe that institutions are going to play a key role in mass adoption. I'd love to continue on the the banking front and bring you inv and you know from your standpoint uh in the banking world um how do incumbents balance this kind of need for um innovation with compliance?

Excellent questions. Uh I think there are a couple of things that that that you that you can do here. So first of all, what we've seen in our organization, but I assuming it's pretty much the same in other big banks, is that it's really great to have an innovation framework in in place that can really help you to assess, quantify, and eventually prioritize what innovation you want to want to go ahead. It's it's much better uh uh taking a framework and and some measurable uh uh uh KPIs and and and data to pick a project rather than let's say gut feelings or personal notions you know especially when it comes to blockchain we really had to put a lot of uh uh uh effort in education and you know uh explain to our board that it's not only scams whatsoever. So anyway uh what I wanted to do what I wanted to mention is really this framework is necessary.

Then secondly I'm a true believer of of PC's. This is really a good way to to understand the technology better test it better without the need to make it fully regulatory compliant because you can do it just within the organization or sort of a friends and family testing. Um but still it's a great way to learn to learn also how this can interact with the legacy system that all of us banks have to have to deal with. And then um there's two more thing I would definitely mention. One is uh this regulatory dialogue.

I do believe it makes sense to have a discussion early on with the regulator about the plans about uh uh the products that that you foresee especially when there's like such a let's call it terra incognita like like my carer that's pretty much new for everyone uh the the regulator made regulation it's there but no one really lived it through so it's it's important to have this open dialogue and the continuous uh communication with them uh also So what's pretty useful here in Europe we have a couple of let's call it regulatory sandbox and like we've heard about it the DT PR regime or in Austria we also had a um regulatory sandbox from from from the Austrian regulator that's really helpful here to to test the waters and the fourth point is uh what always helps is uh spin-off spin-off outsource it maybe make a new uh organization a new new unit that can be sort of a speedboat when it comes to innovation and and uh test uh further. So these are a couple of these instruments that you can really help to uh you know solve this this match of compliance and innovation.

You know it's really interesting what you're saying about regulation and working with regulators. I'm cur curious to hear a little bit more about your experience with that and maybe any learnings you've had from it or any tips you have for people in the audience who who might be going down that path and and want to work with regulators to kind of make all of this happen.

Yes. Um I really think that the best is to uh start with this this conversation as soon as as possible. So the the sooner you you start the conversation the more you also understand what are their needs. they also understand you and there's really uh place enough to maneuver with uh with the with the product because if you already build up everything assuming that I've read the legislation this should be fine then this may this may be really a problem so I would really encourage everyone to seek uh uh uh this this discussion with the regulation with the regulator with a local regulator uh as soon as possible because this will only help you along the way. I I also took it as a really good sign that even today and and yesterday at this event there are couple of regulators here uh uh among us talking to us also on this stage.

So this really shows also that there's a willingness from that side to engage in a discussion and uh uh and work out uh this way of innovation.

That's very positive to see. Now, Dalton, I'd love to talk about another kind of risk that's that's high on people's minds or or kind of a challenge, which is interoperability. It often comes up. Um, wi with interoperability, would you say it's more of a technology hurdle that people are facing, a regulatory or kind of a a standards issue? What are you seeing when it comes to interoperability?

Yeah, it's it's it's a good question and I think this is an area where you know when we look at sort of phase the phase of where we are in the sort of evolution of of tokenization it's it's starting to become more and more critical for I think more and more firms. We've seen a real growth and and sort of emergence of you know companies that are tokenizing various asset classes in different markets in different domains across different geographies. you know once you've tokenized however what next you know that's the question that your clients will be asking that's the question you as a business will be asking and I think you know the next phase of that has to come you know into the how do we get these assets into the hands of you know investors you know within our geography across multiple geographies how do we scale the value of these assets and I think sometimes you know as businesses in this space we sort of lose sight of the fact that we're not actually competing with you know other tokenizing platforms or other players we're actually competing with the status quo we're competing with you know analog issuance ES and analog life cycle management and administration. I think that's where we need to sort of recognize that, you know, within the analog world, you know, if I'm a a brokerage firm, there are there's no technology impediment. There's no platform impediment for me establishing a relationship with a with with two investors, negotiating a deal, and facilitating a transaction.

Whereas in the new world, we need to think about custody. We need to think about are the assets on the same chain? Do they conform to the same token standards that are compatible with my service platforms? And there's there's all of these considerations that we've sort of almost um inadvertently brought into the picture. And these are the areas that I think we need to aggressively solve thinking about even sort of post execution thinking about the life cycle management of the assets.

How do we solve for cash flow dis uh dispersements? So coupon payments, dividends, redemptions and yes we can solve for them with spec with respect to specific technologies but we sort of need to think about models that can scale across protocols across infrastructure solutions and I think that's where more standardization perhaps through convention um is necessary and I think there's a lot more thinking needs to come into that space

definitely and and Fabio from the blockchain side of things how do you build for regulatory compatibility without losing openness? Well, I was going to add to the fact that um I mean we've been working with FINRA and the SEC and every every single part of the product right has to be a submission for the regulators to to foresee and when it comes to interperability I think the hurdle really is uh the risk that one company takes like let's say you have a tokenized stock that you want to move it to your you know your other account would you have tokenized real estate. These two companies have different KYC providers and they have different uh maybe they have different regulation even. So if you want to be able to use reuse that that KYC there there's a risk component and I think that part we haven't figured out yet uh in in a space I see a lot of RWA projects that are secluded. So I definitely agree with Dton that standardization would be would be awesome.

I don't know if that's in the form of DIDs or is that uh an RWA token standard but that's the thing you can link it to to the tokens as well and I see firms like Fireblocks for example proposing their own token standard for tokenized products. Uh so I see a lot but I don't think we we've reached consensus. Uh ultimately what we are trying to do is work with the regulators directly um and trying to get them to uh accept this model in which you get a you get the token once you you you buy the stock. So it's kind of like a digital twin uh and you still get the the dividends, the voting rights and everything that you would do while trading on the on the stock market. Uh from a blockchain standpoint, sorry if I diverged a little bit from your question.

uh what can we do is I think one of the main things that we could do is first of all be prepared in terms of interoperability at the technology standpoint we use IBC there's other standards that are really good as well I I don't think I'm going to say this is the best but it keeps expanding you know IBC now is uh on Solana and there's uh bridges to Ethereum as well so I think that's one key standpoint like be multi-chain ready from the get-go the other thing that we could do is to have programmable compliance, right? And that's why we use smart tokens. Uh there's Solana also calls this the smart tokens, but my point is like having the the the possibility of assigning things like whitelisting, clawax um and other other compliance specific features at the token level. So it's just more lightweight and more um easier to to be compliant ultimately with different regul regulatory setups.

Definitely. So, we've talked a bit about the opportunities. We've talked about the risks. Now, let's talk about the concrete steps to move forward. And I'd like to lead off with you.

What needs to happen in the next 12 to 24 months to for tokenization to become mainstream in banking?

Yeah, I think there's a couple of things that that we can mention here. First of all, first and foremost, I really believe we need cool products. We need cool products and use cases that do address actual uh customer demand, actual customer pain. And um building up on my thoughts from from previously, I I'm a firm believer of of fractionalization of fractionalization of of these new asset classes that now with tokenization you can you can really bring to the market. Think about now real estate.

it really has a very very high uh entry barrier. But when you use uh uh uh tokenization, you can maybe fractionalize, you know, flatsu or or any community goods or or you know, solar panels, you name it. Um um that that people can participate. So I I really believe this is something uh to to go ahead. Then um secondly as we were also discussing um I think um standardization will really help to also establish an ecosystem while secondary markets.

I think this is already the thought uh um my colleagues were were building up on this. Um I think uh it's not enough to have a tokenized product that you sell and you know buy back from the clients in order to make it flourish and and and scale. I believe an ecosystem would be great here which would require again this technical standardization, token standardization, smart contract standardization, you name it. Um I also believe that additional regulatory clarity will be necessary and now I'm thinking really concretely about Europe. Uh you know Mikar is in place.

It's been mentioned a couple of times uh uh today. But there's also MITID. Okay. So there are a lot of investment products that fall under MIFID and if you take uh a MIDI product like I don't know bonds or or or some kind of ETF and you tokenize it is still a MIT product. but then how you kind of uh uh match it with mikar.

So I really believe this is also still a space to to develop on the regulatory clarity. Um and actually I also think that um one idea here is also to use this stable coin momentum. We've been really hearing a lot about now stable coins and their amazing uh uh uh growth which is really great. And I actually have a thought that this could be also uh used for the advantage of tokenization because I see stable coins as a cash leg of of of tokenized products. So I would really hope to see that now this stable coin momentum goes on and is established.

But eventually you will also need use cases and products uh apart from the transactional uh feature of stable coins that there. So I I would love to see that now this momentum will also help uh to grow uh tokenization.

I hope the the bank executives and regulatory leaders in the audience are taking notes. Thank you. It was fun. Um Dotan, I I'd like your perspective on this in terms of the next wave of institutional adoption. Where do you think that will be coming from?

Whether new asset classes, new geographies, new investor segments. What do you see?

Yeah. Yeah. No, I I think um I I I think multiple directions, right? So, when we we look at sort of the institutional space, I think on the wholesale side, um there's certainly an interest in bringing, you know, a lot of existing markets into the digital space. Largely, it's focused on focused on, you know, oper operational efficiencies from from digital infrastructure and that seems to be sort of a big steer for many of these institutions.

Um I think on sort of coming away from the wholesale side, I think this it's much more of an innovation play. We're seeing a lot of interest, you know, specifically from, let's say, more professional players, looking to bring, let's say, traditional assets into the new web 3 world, you know, potentially leveraging them as a sort of eligible collateral to for for leverage trading in crypto products potentially. And there are lots of other use cases that we're sort of seeing the emergence of. Um, but yeah, no, I think I think it's it's fairly broad. It depends on the asset class, but but certainly I think accessibility is a big one.

Innovation with respect to scaling and growing and evolving business practices, business models. Um and then really solving for differentiation and efficiency. So

and Fabio in your perspective what infrastructure or what partnerships will make tokenized markets more scalable? I think just to resonate with what it was saying like stable coins once we have a framework where it's stable coins can be used for cash legs blockchain is the official record of ownership for securities transfer and smart contracts can be used for automation then we'll be in a much better spot to convince the key stakeholders that are kind of like holding on this adoption uh to come on board uh and that has to do a lot with regulation but if you ask me about key partnerships I think partnering with broker dealers or You know the institutions are front lines dealing with regulators really helps and I got to maybe mention the case of El Salvador as well. They are absolutely on board with the vision to tokenize everything and and and offer kind of like uh a path for companies to to easily get offer this legally in the country. We are actually launching a tokenized VC fund in El Salvador uh with an accelerator. And I think that that is a good step also to get VC firms involved because ultimately what you want to be able to offer retail investors is ownership and access to markets that are in traditional finance not accessible for them, right?

like with VC firms getting in a company preIPO and they have certain uh you know uh return on investment that retail investors don't get if they go directly to the stock market. So I think that's one key thing. Um I was going to say something else I forgot. Um, no, but ultimately like if you can go onchain and and there's investment opportunities for any risk profile from you want you want something like a 5% return in a year or you want something like a memecoin. I think once we can blur that uh you know and provide this on the same one KYC platform then we'll be in a much better spot if we're talking about the future.

That's how I envision it. So you can invest in your favorite sports team, the stock market, the European stock market and a real estate investment in Dubai all on the same platform.

And if you had to put a bet on it, you know, El Salvador is happening today and and there are definitely some examples today, but everything else you described, what timeline do you see all this adoption happening in?

I think within the timeline, we are in the institutional buyin stage. Um, so I I foresee this as a five to 10 year change. Although it can be accelerated and competition between governments even is something palpable that is accelerating this. Uh so yeah 5 to 10 years is very conservative to say

did you want to add something?

Yeah just just to maybe just sort of revisit the question of you know what are the what are the big sort of big things that we could do to really move the the sort of space forward um and sort of big challenges to to attack. I mean I would really sort of focus in on two areas. So one would be um looking at how do we bring together effectively the market right how do we solve for critical mass you know I would position this sort of coopetition you know we are lot lots of us new players and really you know looking to drive tokenization and digitization in the ecosystem but nevertheless it's respecting the fact that really our competition is is the the sort of the the the traditional world the legacy universe and then how do we sort of really bring that together infrastructure is a big challenge we need more standardization we need greater interoperability and connectedness So I think being able to sort of tackle that's going to be big. And then the other is going back to the the differentiation point and as sort of many of my um fellow p fellow panelists sort of sort of jumped into it's thinking about how do we make these assets fundamentally more attractive versus their analog counterparts. And we're seeing the fruits of that.

you know, if you can take a listed equity today, which as a retail investor, you know, I've got a 30, you know, 20 30-day SLA to get on boarded with my retail broker and then maybe 20 30 days to um subscribe to the actual asset on their platform. You know, if I can turn that around such that it's accessible on my in my, you know, crypto trading app uh instantly at the push of a button with no minimum ticket size, so I can invest a couple of dollars and dayto-day, you know, or or at the end of the week when it when I received my paycheck. That's powerful, right? And yes, you have you see some erosion of some of the rights and obligations of these assets in terms of how they're structured to bring that accessibility and to unlock it, but it's focused, right? It's a focused use case and a proposition.

There are other propositions targeted to other demographics within the sort of investment community. And I think it's really about understanding how do you build that differentiation visav the analog that I think is really important.

So in our last minute here, I want to do a rapid fire for question for each of you to answer. We'll start with Favio and go down the row. If you had to give one short line of advice to an executive that's exploring tokenization, what would it be?

Executive of what company? Like

an executive of an organization of a of a private company that's that's thinking about tokenization.

One line I would say focus on composibility and like what's next. Don't tokenize something just because you can like focus on what's the actual use case. fun.

Building up on this, I fully agree with Flavio. Start with the P. Start small, start uh uh with a clear focus and really learn a lot on the technical side and also as much as you can also about the customer side.

Yeah, I think going back to the sort of previous points, really understand your use case, what's the proposition, understand the customer you're targeting and again, how do you differentiate that offering visav what they already have access to.

Well, thank you guys. We've covered a lot of ground from interoperability to regulation to collaboration. So leaving the audience with a lot to think about. Thank you all for uh joining and sharing your thoughts.

Thank you for having us.

Thank you so much. Thanks. Thank you.