A group of financial institutions and Web3 innovators have contributed to an in-depth paper on a path to achieve interoperability for tokenized assets across public blockchains, private blockchains and legacy systems.
Released recently, “Institutional Interoperability: How Financial Institutions Navigate a Multichain World” addresses how to “achieve increased accessibility and liquidity for tokenized assets, with flexibility, privacy, transparency and scalability.”
Tokenized assets are on-chain representations of financial assets “such as real estate, currencies and securities.”
A recent report authored by Boston Consulting Group and market operator ADDX predicts multi-trillion-dollar value in tokenized assets within the decade.
All institutions participating in the paper “emphasized the need for interlinked network models that embrace multiple blockchains, as well as traditional systems, in order to realize this potential.”
Financial institutions Citi, Deutsche Bank, Mastercard and Northern Trust contributed insights to the paper in various sections.
Topics covered include descriptions of their projects “in asset tokenization, points where they have implemented multiple blockchains, and potential requirements and challenges for blockchain interoperability.”
Web3-native innovators Axelar Foundation, Centrifuge and Metrika also contributed to the paper.”
The paper acts as a road map “for financial institutions developing tokenized-asset opportunities and facing a complex array of blockchains public and private, alongside stringent requirements imposed by clients and regulations.”
It was authored by blockchain analyst Emily Parker, based “on a framework laid by the Monetary Authority of Singapore’s Project Guardian in 2023.”
Contributors to the paper will be “invited to discuss the paper’s findings in a panel event at Point Zero Forum in Zurich, July 1-3.”
To review the paper, check here.
Georgios Vlachos, director of Axelar Foundation and co-founder of Axelar protocol:
“Tokenized assets are by design interoperable, bridging assets recorded on off-chain ledgers with on-chain representations. The question isn’t, how do we facilitate one such connection – it’s how do we facilitate potentially thousands of connections across on-chain and off-chain ledgers, in a way that’s secure, scalable and open.”
Anand Rengarajan, managing director, global head of sales & head of securities services APAC, Corporate Bank, Deutsche Bank, said:
“Multichain asset interoperability and servicing will in all likelihood become a necessity for securities service providers as their clients adopt different chains. It will be essential that asset servicers know how to address and service interoperability – between chains and with traditional processes – on a cost and risks-managed basis to enable sustainable growth that multiple chains can amplify.”
Alvin Chia, head of digital assets innovation for Asia Pacific at Northern Trust:
“Northern Trust is preparing for significant growth in the share of its assets under custody that are tokenized on-chain. To provide the best services possible to our clients, we’ll need to participate actively in the blockchain ecosystem, connecting multiple blockchains with tailored approaches at multiple points.”
As covered, Axelar is the Web3 interoperability platform, “delivering the shortest path to scale on an open stack to connect all blockchains.”
Adopters include Uniswap, Microsoft and dozens of “natively multichain startups, building applications to reach all blockchain users at once – 10X as many active users as the leading Web3 application environment.”
Axelar supports smart contracts on “a cross-chain layer that is open, scalable and secure. Backers include Binance, Coinbase, Dragonfly, Galaxy and Polychain.”