Mind the Plumbing: Tokenisation, Money and Future of Markets

Asset tokenization is fundamentally reshaping global financial infrastructure by moving institutional workflows like cross-border payments and collateral management onto blockchain-based systems. While stablecoins currently serve as the primary functional cash rails for atomic settlement, they represent a transitional phase, as their overwhelming U.S. dollar denomination creates a "stablecoin sandwich" that hinders multi-currency efficiency. Future progress depends on the development of regulated tokenized deposits and wholesale central bank digital currencies to preserve the two-tier monetary system. Although tokenization promises real-time settlement, it introduces significant liquidity frictions by bypassing traditional multilateral netting mechanisms. Furthermore, the transition necessitates robust regulatory oversight, such as the U.S. Genius Act and Europe’s MiCA framework, to mitigate risks to monetary sovereignty and ensure systemic safety. Ultimately, traditional banks remain essential for managing compliance, identity, and liquidity throughout this gradual, highly regulated evolution.