How tokenization and on-chain capital markets are reshaping global finance

Transformation often happens quietly – an unseen earthquake that changes the landscape before we realize it's occurred. Right now, the financial world is shifting beneath our feet and this year's World Economic Forum Annual Meeting in Davos, Switzerland, signalled the tremors of profound change.

The future of money and digital assets is a key focus at the Forum, including how tokenization is used in traditional finance, how new and traditional assets interact and what this means for public and private markets.

Tokenization is the process of converting assets – e.g. stocks, real estate or commodities – into digital tokens on a blockchain, making them easier to trade, track and manage.

Central bankers, governments and financial institutions are now driving and observing how decentralized finance fits into the broader financial ecosystem.

At the same time, the political and regulatory landscape is accelerating, particularly in the United States. Ultimately, everyone needs certainty around how digital assets are regulated and the different jurisdictional approaches are shaping what we can expect from future regulations.

Now, the long-envisioned convergence of traditional finance and crypto assets is happening and poised to rewrite the rules of global finance.

At the heart of this revolution is the rise of an on-chain capital market infrastructure, an innovation that promises unprecedented efficiency, liquidity and interoperability across global financial systems.

The core of this shift is blockchain-based "on-chain" capital market infrastructure, unlocking greater efficiency, liquidity and interoperability worldwide.

For two decades, traditional finance and crypto have existed in silos, separated by technology, culture and regulation. Unified on-chain ecosystems have dissolved these barriers, allowing for a more connected financial system that is arguably more resilient and accessible as capital will be able to flow more freely.

Circle, which is building a stablecoin network, recently announced new moves in Davos to aid this merge, including a new acquisition, strategic partnership and the launch of the cryptocurrency USDC on the Canton Network – a privacy-enabled open blockchain network.

Why does this matter? The combination of USDC, a stablecoin that moves freely, with USYC, a yield-bearing coin and Canton, a blockchain that offers configurable privacy and decentralized governance, could eliminate barriers that have kept traditional finance and crypto apart.

It creates the rails for 24/7 on-chain capital markets where tokenized cash and collateral can be exchanged instantly and privately. This development changes how assets move, settle and trade – both on exchanges and over the counter – making financial transactions faster and more efficient.

It is based on the principles of open governance to ensure transparency, fairness and collaboration while fostering the growth of regulatory-grade blockchain infrastructure.

This approach allows Canton to link previously isolated financial systems while maintaining privacy and control. By tokenizing assets, such as gilts, euro bonds and gold, it enhances collateral mobility and now powers over half of all digital bond issuances.

These advancements provide immense opportunities for growth. Analysis shows, only $25 trillion of securities are currently eligible for use as collateral, a fraction of the potential $230 trillion pool. Tokenization, which improves collateral mobility and capital efficiency, could unlock this untapped capital and optimize intraday liquidity so that funds can be accessed and moved within the same trading day to meet payment and settlement obligations.

Moody's Ratings also pointed out last year that blockchain-powered secondary markets eliminated known inefficiencies and high operational costs.

The benefits of 24/7 access, enhanced efficiency, liquidity and configurable privacy to institutions that have long struggled with the inefficiencies of traditional systems have already seen increasing use cases.

Institutional crypto firms and early traditional finance adopters such as Broadridge, BNP, HSBC, Goldman Sachs and others are testament to that, edging the world closer to a new normal of a constantly accessible, interoperable ecosystem that can adapt to the demands of a fast-moving, globalized economy.

And we expect to see a growing number of use cases in primary and secondary markets.

The tectonic plates are shifting and global finance is entering a new chapter. Markets are becoming always-on, transactions are accelerating and capital is moving more freely than ever before. Whether you're a business leader, an investor, or simply curious about the future of money, this is a pivotal moment.

The groundwork for the next era of finance is being laid right now.