Tokenized Finance Has a Settlement Problem That Blockchain Alone Cannot Solve

Financial institutions are discovering that issuing an asset on a blockchain is considerably easier than integrating it into the global financial system. Tokenized bonds, bank deposits and investment funds can operate on programmable networks, but completing transactions between institutions still requires coordination across payment systems, custodians and legal jurisdictions. The challenge is becoming more significant as tokenization moves beyond isolated experiments. Banks need more than digital representations of securities. They need reliable mechanisms to exchange assets for payment, move collateral between institutions and establish when transactions are legally final. Blockchain technology can automate parts of these processes.