Blockchain

Blockchain emerged in 2008 within the now famous Bitcoin white paper, published under the pseudonym Satoshi Nakamoto.¹ The invention wasn’t just a new type of money – it was a new way of reaching agreement about digital records without relying on a single, central authority.

Blockchain is a shared digital ledger that everyone can rely on, doing away with multiple ledgers that need to be reconciled or a single central authority. At the time, this breakthrough was easy to underestimate, but it has the potential to transform the financial sector.

Today, that ledger architecture has evolved far beyond the cryptocurrencies it originally served. Banks, asset managers, custodians and regulators are exploring how blockchain can reduce cost, increase speed and simplify how financial markets operate. In other words: blockchain may be doing for asset ownership what broadband did for information – moving us into a much more connected, much more efficient world.

At first glance, global finance looks digital. Payments are instant, trading is electronic, systems are automated. But beneath the surface, the industry still relies heavily on duplicated records.

Every institution – the asset manager, the custodian, the transfer agent, the administrator, and the broker – keeps its own ledger. These ledgers rarely match perfectly. They require constant reconciliation.

This reconciliation isn’t a small task. It is one of the most time-consuming, resource intensive parts of financial operations. Billions are spent every year checking, matching, correcting, confirming, chasing, querying and updating records – all of which describe the same transaction in slightly different ways.

Ask any parent to describe the reality of modern life and many will start with the same challenge: trying to run a household powered by nine (or more) different calendars. One child’s homework sits in Google Classroom, football fixtures arrive by email, dentist appointments live on someone’s iPhone, and the grandparents operate on whatever was agreed over roast chicken two Sundays ago. The problem isn’t a lack of information – it’s a lack of alignment.

Financial institutions face precisely the same issue, but on an industrial scale: countless records, no shared source of truth, and endless reconciliation to make everything match.

Blockchain changes the architecture. It is the shared family calendar of global finance. One ledger that everyone sees, updates and trusts.

A blockchain is a shared database. A record that’s permanent, with rules that automatically run the process around it.

The name comes from how the data is stored. Transactions are recorded in small batches, called blocks, and each new block is cryptographically linked to the one before it, forming a chain. If someone tries to alter past data, the links no longer match, making the tampering immediately visible.

A useful analogy is that of a multiuser Excel spreadsheet with a perfect audit trail. Everyone with permission sees the same data. Every update is timestamped. The system automatically keeps everyone in sync. This alone is transformative for markets built on fragmented data.

There’s another important difference. Unlike a central register held in one place, a distributed ledger is shared across many independent systems. That means there’s no single point of failure. To disrupt or corrupt the record, you’d need to compromise many participants at the same time, not just one database or institution. In practice, this makes the ledger far more resilient to outages, attacks, or operational failures.

Blockchain solves a handful of very practical problems. It:

• provides instant verification between parties
• creates transparent, time stamped records
• reduces operational and settlement risk, enabling speed
• cuts duplication across institutions
• lowers costs across the entire value chain

The real benefit comes from the fact it aligns information upfront, before inaccuracies and inefficiencies have the chance to accumulate.

One of the pitfalls of early blockchain conversations was the belief that it would create an entirely new financial system. In reality, the innovation is more subtle and arguably more powerful. Uber didn’t reinvent the car; it reorganised coordination and built trust in a fragmented market. That was only possible once the underlying infrastructure – digital maps, smartphones and constant connectivity – was in place.

Blockchain aims to do something similar for financial markets. It doesn’t replace the assets themselves. It simply offers better plumbing for issuing, owning, transferring and tracking them. Tokenisation is the process of using blockchain to represent real world assets digitally on shared infrastructure.

Not all blockchains work the same way. A helpful way to think about them is to distinguish public from private blockchains.

Public blockchains are open, networks where anyone can read, write, and validate transactions, maximising transparency and decentralisation, but at the cost of privacy and institutional control.

Private blockchains sit at the other end of the spectrum: access is restricted to approved participants, governance is clearly defined, and data visibility can be tightly controlled.

Permissions add another dimension between these two models. By defining who can access the network, validate transactions, or view sensitive data, ‘permissioning’ allows institutions to balance openness with compliance, privacy, and risk management.

Hence why many financial institutions are pursuing public permissioned blockchains as their preferred solution.

Smart contracts are simply automated instructions that run on the shared ledger. They aren’t legal contracts. They’re small pieces of code that monitor conditions and execute actions when those conditions are met.

In practice, this means smart contracts can:

• trigger settlement once both sides have delivered
• update ownership records instantly
• enforce eligibility rules
• distribute payments automatically
• remove manual checks and reconciliation steps

Because they run on shared infrastructure, every participant sees the same outcome at the same time. Processes that today require messaging, confirmation, or intervention become automatic and synchronised by design.

This is the core link between blockchain and tokenisation: once assets sit on a shared ledger, the workflows around them can be automated safely and consistently.

Take a straightforward example: a bond trade settling in today’s markets. The trade typically passes through multiple institutions – dealers, custodians, clearing and settlement systems – each maintaining its own record of the same transaction. These ledgers rarely align instantly, so settlement can take time while various parties run checks, confirm details, and reconcile differences. The process works, but it is slow, resource intensive and prone to operational friction – and the investor waits.

With blockchain, all participants are writing to the same shared ledger from the outset. Ownership updates as soon as the transaction is validated, and smart contracts handle the workflow automatically. Settlement becomes almost instant, reconciliation effectively disappears, and operational risk falls sharply because every party is working from the same synchronised data.

The result is a process that is cleaner, faster and more transparent. Even where same-day settlement already exists, near instant settlement creates new optionality. Collateral can move in real time, balance sheets can be optimised intraday, and liquidity becomes more flexible across markets. This is why blockchain is now underpinning the growth of tokenised funds, bonds and cash-like instruments.

Blockchain is already operating well beyond the crypto ecosystem and is being deployed in largescale, regulated financial settings. Tokenised money market funds have moved from pilots into production, with industry analyses noting their use for faster settlement, improved collateral mobility, and more transparent audit trails.²

Tokenised government and corporate bonds are also transitioning into live environments, supported by regulatory-compliant blockchain platforms that enable real-time issuance, trading and settlement.³ Cross border payments are increasingly settling over blockchain networks with 24/7 availability, and institutions are exploring on-chain collateral mobility to replace batch-based, message-driven workflows.

Outside capital markets, smart contract-enabled processes are being adopted in parametric insurance, carbon markets, emissions registries, and real-world asset tracking across property, commodities and supply chains.

Throughout these applications, enterprise-grade blockchains built for regulated actors now offer the privacy, performance, energy efficiency and governance features that institutions require – a shift highlighted by both BIS research and independent industry studies.

Forecasts suggest this is only the beginning. McKinsey estimates that tokenised financial assets could reach trillions of dollars in the coming decade as the market moves from experimentation to scaled deployment.⁴

Several forces are now converging to make institutional adoption viable in a way it simply wasn’t a few years ago. Regulatory frameworks are becoming clearer across major jurisdictions. Enterprise-grade blockchain networks are reaching production scale, and critical market infrastructure.⁵ Custodians, exchanges and service providers are building native capabilities around tokenised assets. At the same time, cross border central bank digital currency (CBDC) pilots are testing interoperability, and tokenisation programmes across the industry are moving from proofs of concept into live deployment. In practical terms, the technology, the regulatory environment and the market demand have finally aligned.

For all its promise, blockchain still faces real challenges that require engineering discipline and regulatory coordination. A central issue is operational resilience. Reviews of major losses over recent years show that most failures did not stem from flaws in the underlying technology, but from human and organisational weaknesses: poor access controls, weak governance, and lost or mismanaged cryptographic keys.

Cryptographic keys are the digital credentials that prove ownership and authorise transactions, effectively replacing passwords and signatures. When they are mishandled, control over assets can be lost even though the system itself is functioning exactly as designed. Such operational failures, rather than technical breakdowns, have been responsible for billions in losses across both decentralised and enterprise implementations.

Cybersecurity risks add another layer of complexity. As blockchain systems become more widely used, they attract increasingly sophisticated attackers. Nevertheless, the ledger itself is rarely the direct target. Instead, attacks tend to focus on the surrounding environment: phishing users, stealing credentials, compromising devices, or exploiting weaknesses in how systems are operated. In future, quantum computing may pose risks to the security of blockchains. At the same time, developments in quantum computing-based security protocols will offer new protections.

Smart contracts introduce additional risk because they automate actions directly; once deployed, even small coding errors can have severe consequences. This reinforces the need for strong controls around development, testing and auditing, alongside ongoing monitoring and clear accountability for how these systems are run in practice.

These technical issues sit alongside structural ones: governance design is still evolving, regulatory approaches diverge across jurisdictions, integration with legacy systems is uneven, and industry standards for data, identity and interoperability are still maturing. These are all solvable problems – but they require careful engineering, stronger cross- industry standards, and sustained regulatory collaboration to reach the level of robustness required for largescale institutional use.

At one level, scale is now here. Large global banks already use distributed ledgers to settle trades, move collateral and manage intraday liquidity. These systems operate under regulatory oversight and sit alongside existing market infrastructure. They are already moving large volumes of financial assets fast and securely.

Asset management is catching up not because the technology is new, but because it is now mature, institutionally governed and ready to be used beyond the banking system.

However, there is progress still to be made before adoption reaches a mass level. In our view a key factor will be trust in the technology. And we have certainly seen this before.

Take navigation. For centuries navigation relied on local knowledge, printed maps, and manual coordination. It worked, people achieved navigational feats, trade flourished. Then, global timekeeping, satellite networks and widely available digital maps changed the tools people use to navigate. Today, people trust the mapping tools available to them implicitly, can coordinate movement at scale, and optimise logistics in real time.

In each case, trust did not disappear. It moved. It shifted away from individual relationships and visible intermediaries into shared systems that could be verified, audited and relied upon by many parties at once. Blockchain technologies represent the same shift for ownership, settlement and coordination in financial markets.

Most great innovations in infrastructure become invisible once they are fully working. You don’t think about broadband – you think about streaming. You don’t think about the payment systems behind your card – you think about buying your morning coffee.

Blockchain is on the same trajectory. Investors won’t experience ‘blockchain’ directly. They’ll experience new wrappers around familiar assets. Faster settlement, greater flexibility and more seamless use of their capital with the technology – the blockchain, as the wiring in the walls – essential, trusted and largely invisible.

As the financial system becomes more connected, more digital and more real-time, blockchain will quietly sit underneath it – all but invisible to its users, but making everything around it faster, safer and more efficient.