Top executives at asset management titan BlackRock say traditional finance players are starting to see the advantages of tokenization.

In a joint op-ed published in The Economist, BlackRock’s CEO Larry Fink and chief operating officer Rob Goldstein say that tokenization used to be associated with the crypto boom often linked to speculation but this view is changing. 

Tokenization is the process of converting ownership rights into digital tokens on a blockchain, enabling assets such as corporate debt and real estate to exist on a single digital record that can be independently verified.

“In recent years, traditional finance has seen what was hiding beneath the hype: tokenisation can greatly expand the world of investable assets beyond the listed stocks and bonds that dominate markets today.”

Fink and Goldstein say that tokenizing assets offers two broad benefits. One is that it offers the potential to settle transactions instantaneously.

“Today’s markets operate on different settlement timelines, exposing buyers and sellers to the risk that one side might not fulfil its obligations. Standardising instantaneous settlement across global markets would be a leap beyond what swift ever made possible.”

The technology can also transform private-market asset transactions that still rely on manual processes. 

“Tokenisation can replace paper with code, reducing the frictions that make assets costly and slow to trade. It can turn large, unlisted holdings such as real estate or infrastructure into smaller, more accessible units, broadening participation in markets long dominated by large institutions.”