Banks Embrace Digital Asset Trading Amid Rising Tokenization

As the financial landscape continues to evolve with the rise of digital assets, banks are increasingly exploring trading and brokerage services for these new asset classes. According to Fireblocks, major institutions like JP Morgan, Goldman Sachs, and Morgan Stanley have already demonstrated significant revenue from traditional trading operations, and the shift to digital assets is seen as a natural extension of their existing roles.

The Shift to Digital Assets

With the tokenization of equities, bonds, and other financial instruments, banks are faced with the decision to either adapt their infrastructure to accommodate these changes or risk losing revenue to crypto-native platforms. The migration of activities to platforms like Coinbase, which generated $4 billion in transaction revenue in 2024, illustrates this shift. As tokenization scales, banks are seeking to maintain control over trading, execution, and custody revenues.

Why Now?

The growing interest in digital assets is driven by several factors. For retail banks, a significant portion of their younger clientele is already engaging with cryptocurrencies, often outside the traditional banking system. Additionally, global markets and wealth divisions see digital assets as a continuation of their roles in providing liquidity, financing, and structured products.

Building Digital Asset Capabilities

Banks are advancing in stages to build their digital asset capabilities. Initially, many institutions use a whitelabeled broker-custodian model to test demand. However, as they gain confidence, they move towards direct custody and agency execution under bank governance, integrating these operations with existing compliance and surveillance processes.

Further progression includes the development of prime brokerage functions, which consolidate access across various trading venues and manage collateral efficiently. As markets mature, banks can expand into dealing and liquidity provision, and eventually offer structured and investment solutions in tokenized formats.

Leading the Charge

Institutions like HSBC, UBS, and ABN-AMRO are already experimenting with issuing bonds and structured products in tokenized formats. As the infrastructure for digital asset trading matures, banks that have established a solid foundation will be poised to lead in this burgeoning market.

The Strategic Path Forward

To effectively engage in digital asset trading, banks are incorporating several key components into their strategies, including direct custody, wallet governance, best execution practices, and comprehensive post-trade integration. This approach ensures that banks remain within regulatory frameworks while adapting to new market demands.

Ultimately, the banks that act now to integrate digital asset trading and brokerage into their operations will be best positioned to capitalize on the efficiencies and opportunities presented by tokenized finance.

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