An examination of programmable assets, settlement innovation and the risks that could shape adoption
For decades, the financial industry has improved the speed of transactions while leaving much of the machinery behind them intact. A payment message can move quickly, yet participating institutions may still need to reconcile separate records, verify ownership and arrange settlement. Securities markets face comparable divisions between trading, custody, collateral management and the eventual transfer of cash and assets. A new technological approach aims to compress those steps. It is called tokenisation, and its significance lies less in digital tokens themselves than in the possibility of changing how financial claims move.
The trend has gained attention from banks, asset managers and central banks, but the distinction between experimentation and a fully functioning market remains important. In an April 2026 analysis, the International Monetary Fund described tokenisation as a structural change in financial architecture, while warning that speed, concentration and fragmentation can generate new vulnerabilities. The opportunity is considerable; the commercial and regulatory conditions for success are not yet uniform. [1]
A change in the plumbing, not just the packaging
Tokenisation represents a financial asset or liability on a programmable digital ledger. A token might correspond to a deposit claim, a bond or another instrument whose ownership and associated rights can be recorded and transferred according to agreed rules. Traditional finance is already overwhelmingly digital. The difference is that shared records and programmable instructions could make actions which currently occur in sequence happen together. [3]
Consider a securities transaction. Today, a purchase may involve several records maintained by trading venues, custodians, clearing systems and banks. On an appropriately designed platform, the transfer of a tokenised security could be made conditional on a corresponding transfer of money. This is often called delivery versus payment, or atomic settlement. It could limit the interval during which one party has delivered an asset but has not received the payment. Yet it does not remove the need for dependable assets, finality under applicable law or a mechanism to resolve disputes. [5]
The Bank for International Settlements has proposed a unified-ledger model bringing tokenised central bank reserves, commercial bank money and government bonds onto a common programmable infrastructure. Its argument is not that every institution should operate on an open blockchain. Rather, trusted financial claims could be coordinated through shared technology while retaining the essential roles of central and commercial banks. The model is a proposal and direction of research, not evidence that a single global ledger is imminent. [2] [6]
Why cross-border payments remain a priority
Cross-border payments illustrate the appeal. An international transfer can pass through correspondent banks, each applying procedures, maintaining records and processing parts of the transaction. Different operating hours, messaging standards and compliance checks add friction. Shared programmable arrangements may reduce repeated reconciliation and better coordinate transfers between institutions. They could also make some compliance information available at the appropriate point in a payment workflow. [2]
The difficulty is that cross-border payments involve legal jurisdictions as well as technology. A transaction may need to satisfy anti-money-laundering requirements, sanctions restrictions, data-protection law and the rules of payment systems on both sides. No technical design can simply abolish those duties. To be useful at scale, a new platform has to establish which institution verifies a customer, who has access to sensitive information, who can interrupt a suspicious transaction and what happens when one component fails.
Interoperability is consequently just as important as processing speed. A highly efficient system used by only a handful of participating banks may create another isolated network. If tokens cannot transfer between venues, liquidity becomes fragmented and institutions may have to maintain duplicate pools of cash and collateral. The IMF has identified network effects as a reason infrastructure could become more concentrated even if certain intermediary costs decline. [3]
The central-bank question
The public sector is not watching from the sidelines. In a BIS survey covering 93 central banks and published in August 2025, 85—91 percent—reported that they were exploring retail central bank digital currency, wholesale central bank digital currency or both. Wholesale initiatives, which concern institutions and financial-market processes, were generally further advanced than retail projects in that survey. Exploration, however, should not be confused with a decision to issue a currency or to put a system into live production. [4]
For market participants, the form of money used in settlement matters. If a security is exchanged against a token representing a private issuer’s liability, the buyer must consider the reliability of that issuer and the redemption arrangement. Central bank money can provide a different settlement anchor. Commercial bank deposits bring their own established regulatory and banking relationships. The BIS framework argues for preserving monetary integrity and the singleness of money while changing the technology on which financial obligations are transferred. [6]
Stablecoins are part of the broader discussion but are not interchangeable with tokenised bank deposits or central bank reserves. Different structures carry different redemption claims, asset backing and regulatory treatment. The BIS has expressed reservations about stablecoins serving as the main foundation of the monetary system. That judgment should not be read as a conclusion that every stablecoin has identical risks, but it reinforces the need to distinguish the legal claim behind a digital instrument from the technology displaying it. [2]
What investors and treasurers could gain
Tokenisation is also attracting attention in asset management and corporate treasury. Automated instructions could support coupon distributions, collateral transfers and certain administrative processes. More timely information on holdings could reduce duplicated reconciliation. In markets where the relevant legal and operational conditions are met, coordinated settlement could allow investors to deploy cash or securities more efficiently. [1] [8]
The potential gains are not identical for every asset. A government security with standardised documentation may be easier to incorporate into a programmable market than an interest in physical property involving local title records, valuation disputes and maintenance obligations. Even where an instrument is tokenised, someone must establish that the token holder has an enforceable right to the underlying asset. The asset does not become safer merely because its ownership record is easier to transfer. [5]
Treasurers should therefore start with specific processes rather than an assumption that tokens will automatically lower funding costs. Is collateral sitting idle because records update at different times? Are reconciliation expenses genuinely material? Does the intended platform allow transfers to reach legal finality? Which liquidity providers will be present during stressed markets? Only a complete cost comparison can show whether a tokenised arrangement improves the existing process.
The risks move rather than disappear
Faster settlement can reduce some exposures while intensifying others. The IMF has warned that programmable links between institutions could transmit shocks rapidly, especially where leverage or liquidity buffers are poorly managed. Automatic collateral calls may work precisely as coded but still produce destabilising sales if many participants respond simultaneously. Software errors, compromised data feeds and concentrated technology providers introduce risks that conventional asset-transfer procedures may not fully capture. [3] [8]
Governance is therefore a financial-control question. Institutions need to know who can change a smart contract, suspend a faulty process, recover from an outage or reverse an erroneous instruction where the law permits. Audits of code are useful, but a one-time review cannot guarantee security against future vulnerabilities. Contracts must allocate responsibility among platform operators, custodians, banks and customers, particularly when a cross-border dispute is involved.
Artificial intelligence may increasingly be used alongside new infrastructure to monitor transactions or support operational decisions. That does not make the combination risk-free. The Financial Stability Board has warned that AI adoption may amplify dependence on common providers, model failures, cyber vulnerabilities and correlated market responses. Those issues reinforce the argument for independent testing, clear human accountability and resilience planning rather than assuming automation will remove the need for oversight. [7]
How to distinguish a genuine trend from a pilot
The practical test for the industry is not how many tokenisation announcements appear. It is whether initiatives can operate repeatedly under realistic legal, liquidity and cybersecurity requirements. Financial institutions should examine the number and diversity of participants, the availability of safe settlement assets, the enforceability of ownership rights, the quality of operational controls and the ability to interact with other infrastructures.
Costs also deserve scrutiny. A project may remove reconciliation steps but create spending on integration, specialist staff, security reviews and maintaining legacy systems during transition. A nominally continuous platform may still depend on banks or legal processes that do not operate around the clock. Benefits should be measured through settlement failure rates, collateral usage, processing time and total end-to-end cost rather than headline transaction speed alone.
For regulators, the challenge is to accommodate worthwhile experimentation without letting untested arrangements become critical before their failure modes are understood. For banks, it is to preserve customers’ confidence in money and asset ownership while participating in new infrastructure. For investors, it is to distinguish the value of the underlying claim from claims made about its digital form.
The next stage of financial modernisation
Tokenised finance may change the organisation of financial markets more profoundly than an additional consumer-facing payment application. Its strongest case lies in integrating records, contractual instructions and settlement, particularly where the current system requires many institutions to repeat related tasks. But technological integration cannot substitute for legal certainty, liquidity, sound money or effective supervision.
The most credible outlook is neither immediate transformation nor dismissal. Banks, financial market infrastructures and policymakers are exploring ways to combine programmable technology with established safeguards. As those projects develop, the critical question will be whether they produce reliable, interoperable services that improve actual financial outcomes. The future of tokenisation will be decided less by the novelty of the token than by the quality of the system supporting it.
References
1. International Monetary Fund, Tokenized Finance (April 2026). Source link
2. Bank for International Settlements, Annual Economic Report 2025: The Next-Generation Monetary and Financial System. Source link
3. IMF, Tokenization and Financial Market Inefficiencies (January 2025). Source link
4. BIS, 2024 CBDC Survey Results (published August 2025). Source link
5. IMF, What Is Tokenization? (September 2025). Source link
6. BIS, Next-Generation Monetary and Financial System Takes Shape (June 2025). Source link
7. Financial Stability Board, The Financial Stability Implications of Artificial Intelligence (November 2024). Source link
8. IMF, Tokenized Finance and Money (May 2026). Source link