Tokenization Standards Shape Investment Bank Crypto Plans

AI Summary

The popular narrative around Tokenization is that almost every financial asset will eventually move onchain. The more concrete finding from Soda is considerably narrower: the clearest opportunities identified by major Investment banks are tokenized collateral, intraday repurchase agreements and cross-border foreign exchange.

That distinction matters. The technology may support bonds, equities and other regulated assets, but technical capability does not create a functioning market by itself. According to Soda founder and CEO Chris Ostraki, the firm surveyed 16 large investment banks and focused on the decision-makers responsible for global markets businesses rather than innovation teams running isolated experiments.

Anthony Ralphs, founder of Nova Modus and formerly at Ripple, approached the same problem from the infrastructure side. His work with Soda and MIT collaborators concentrates on Interoperability: how assets can retain consistent identities and attributes when different institutions use different ledgers.

What Investment Banks Are Planning With Crypto....

Investment banks are narrowing the business case

Soda’s survey was designed to separate institutional interest from deployable business demand. Ostraki said many banks had already conducted proofs of concept involving tokenized bonds, equities, lending arrangements and smart contracts. Those exercises demonstrated what blockchains could do, but they did not necessarily change the economics of a trading desk.

“The actual adoption in a way that is scalable and in a way that provides a before and after difference just isn’t really been happening.”

The survey therefore asked who sponsors tokenization internally, who provides funding, whether demand comes from clients, and whether the expected benefit improves a bank’s balance-sheet efficiency. Ostraki said the respondents identified two areas where commercial value appeared close enough to influence day-to-day operations:

Tokenized collateral: assets could move more quickly between positions and potentially be committed for shorter periods.
Intraday repo: collateral and cash could be exchanged and returned within the day instead of remaining tied up overnight.
Foreign exchange: tokenized cash could support faster currency settlement and reduce the need to pre-position liquidity.
Cross-border payments: linked cash legs could make international value transfer more efficient where existing processes are costly.

Equities attracted much less interest among the bankers surveyed, according to Ostraki. Debt issuance showed some potential, but he cautioned that issuing a tokenized bond does not transform the market if active secondary trading and interoperable settlement remain absent.

Why intraday repo offers a measurable benefit

A repurchase agreement allows one party to pledge securities, often government bonds, in return for cash. Banks use that cash to finance trading positions. The transaction is later reversed, returning the securities to the original holder and the cash to the lender under the agreed terms.

“The first is tokenizing collateral.”

The potential advantage is Collateral mobility. If a bank needs liquidity for only part of a day, a programmable transaction could theoretically release the pledged asset once the obligation has been satisfied. That would allow the same collateral to support another eligible transaction instead of remaining unavailable overnight.

Intraday repo is therefore not compelling simply because settlement becomes automated. The stronger proposition is that collateral can be allocated with greater precision. Faster recycling could reduce idle periods and improve how a bank manages liquidity across trading books.

Shorter commitment: collateral could be pledged for the period in which cash is actually required.
Faster reuse: a released asset could support another eligible transaction within the same day.
Coordinated settlement: the securities leg and tokenized cash leg could be handled as connected parts of one transaction.

Our analysis is that this is a more credible institutional thesis than broad claims that every security should immediately move onchain. It begins with a specific balance-sheet problem and asks whether tokenization can solve it at lower operational or liquidity cost.

Tokenized FX still needs a dependable cash leg

Foreign exchange presents a related but distinct use case. Instead of exchanging a security for cash, the transaction exchanges one currency for another. Ostraki said intraday FX swaps and cross-border liquidity were among the areas where bankers could see a benefit for clients, counterparties and their own financial targets.

The practical objective is payment versus payment: neither currency leg should settle without the other. Tokenized deposits, central-bank money or appropriately structured Stablecoins could eventually provide forms of digital cash, but the discussion did not establish one universal instrument for this role.

Availability: both currencies must be accessible when settlement is due.
Finality: participants need confidence that completed transfers cannot be unexpectedly reversed.
Legal treatment: token holders must know what claim the digital instrument represents.
Operational coverage: a continuously available market requires staffing and controls beyond a five-day banking schedule.

This creates an important dependency. Tokenized collateral cannot produce an interoperable repo market unless compatible digital cash is available for settlement. Likewise, Cross-border payments cannot scale merely because two currencies have been represented as tokens.

Legacy integration remains the immediate constraint

Ostraki said 70% of respondents identified integration with legacy systems as the largest blocker for the surveyed intraday repo use case. This percentage is a reported survey result, not evidence that every bank faces identical constraints. It nevertheless points to the gap between demonstrating a transaction and embedding it within treasury, trading, custody, risk and settlement operations.

The institutional ledger of record cannot simply be ignored. Banks must reconcile any blockchain transaction with existing booking systems, capital calculations and legal agreements. They also need rules for failures, disputes, sanctions controls and operational responsibility outside established market hours.

Technology: new ledgers must communicate with existing systems of record.
Governance: treasury and markets teams need aligned authority and incentives.
Law: digital records and automated actions require enforceable treatment.
Capital: banks need clarity on how tokenized positions affect regulatory requirements.
Operations: continuous markets require workable controls for weekends and other nonstandard hours.

Ralphs compared this transition with earlier changes in electronic communications. His core point was that regulation and institutional processes must recognize the new mechanism before banks can rely on it at scale. Regulatory clarity can reduce uncertainty, but it does not perform the integration work.

Public and private ledgers are likely to coexist

“I think it’s going to be both.”

Ralphs expects public and private blockchains to coexist because institutions have different requirements for privacy, access and control. A restricted wholesale transaction may not benefit from public visibility, while a widely distributed retail asset may gain utility from open access and composability.

The trade-off is fragmentation. If every institution creates a private network, liquidity and collateral become divided across isolated venues. A participant operating on several platforms must maintain connections, controls and potentially liquidity for each one. Public networks such as Ethereum, Solana and the XRP Ledger offer broader access, but regulated institutions still have to resolve privacy, identity and legal-control requirements.

The correct architecture therefore depends on the market being served. The decision should begin with who needs to transact, what information can be visible, and what legal rights must persist. Choosing a blockchain first and searching for a use case afterward risks reproducing the isolated infrastructure that tokenization is supposed to improve.

Token standards must preserve identity across chains

“There needs to be a common blueprint for core elements of how information is exchanged.”

The interoperability work described by Ralphs focuses on the data attached to an asset rather than selecting one bridge or network. Providers such as Chainlink may address communication between chains, but a transport mechanism still needs consistent information about the token being moved.

Ralphs identified a proposed core header containing a name, symbol, decimal precision and a resource identifier. Decimal precision is not a cosmetic detail: moving an instrument between systems that represent fractions differently can change what the receiving system records. Consistent Token standards could reduce the amount of interpretation required from bridges and other intermediaries.

Asset identity: the receiving system should know which instrument arrived.
Issuer provenance: participants should be able to connect an onchain address to a recognized entity.
Precision: the token should retain consistent divisibility across networks.
Transfer history: records should indicate whether the asset has been wrapped or bridged.
Extensible metadata: asset-specific information could describe matters such as bond expiry or reserve documentation.

One proposed identity mechanism is the Legal Entity Identifier, which could associate an issuer with an established organizational identifier. That would not eliminate every authenticity or compliance risk, but it illustrates how existing financial standards could be incorporated into tokenized markets.

Wrapped assets create another unresolved question. Ralphs reported that legal practitioners had questioned whether a wrapped stablecoin remains the original asset or becomes a derivative. His proposal includes provenance information and controls indicating whether an issuer permits wrapping. These ideas remain part of a developing specification and pilot process, not an adopted global standard.

What this means

“You can write the best standards in the world, but scale and adoption come when there’s a business case, when there’s a need, when people decide that it’s better than the current system, when it’s worth the while.”

Repo and FX are the practical starting points. The surveyed bankers saw clearer economic value in collateral mobility and currency settlement than in tokenizing equities merely because the technology permits it.
Interoperability is an adoption condition. A collection of bilateral pilots cannot become a market unless assets, cash and identifying data can move between participating systems under common rules.
Standards will follow incentives as much as engineering. In our view, institutions will accept shared specifications when the financial benefit of joining an interoperable market exceeds the cost and risk of changing their systems.

Bigger picture

The emphasis on connected settlement infrastructure is consistent with several verified developments covered by AllinCrypto. The DTCC connection with Ondo Finance placed tokenized assets alongside established fund distribution infrastructure, while a separate DTCC rollout involving Stellar highlighted a phased approach to market adoption.

Other developments show why multiple rails are likely to persist. Franklin Crypto identified Ethereum and Solana as tokenized market rails, while Ownera connected tokenized asset orchestration to Hedera. Meanwhile, the SEC innovation exemption coverage placed onchain stock trading within a developing regulatory discussion.

Those developments do not prove that one common standard will prevail. They do support the underlying need: tokenized markets are being developed across different networks, institutions and asset classes. Our analysis is that the competitive question will increasingly shift from which ledger can issue an asset to which combination of standards, controls and settlement assets can support a dependable market.

Sources

This article is for informational purposes only and does not constitute financial advice.

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