Digital assets, including tokenized assets, are poised to change the entire financial ecosystem. Digitization through blockchain technology can remove intrinsic friction in the movement of value while automating various services and activities. Ratings firm Moody’s has distributed a report on how tokenization will alter US transaction flows.
According to the report, there are three probable scenarios as to how tokenization will impact financial services.
First, there is the “Steady Growth base case,” where “tokenization starts to scale in select assets, but incumbent asset managers, banks, and infrastructure providers retain central roles.” This is the most likely path, states Moody’s. Intermediaries will persist in this case.
The low Growth Mode is where tokenization remains confined to narrow use cases, with only modest changes to the financial ecosystem. This could be driven by a lack of regulatory clarity and slow demand. Moody’s sees this leading to digital assets remaining on the fringes.
The final possibility is a Rapid Growth scenario where stableocin usage grows dramatically, and things change in a more disruptive manner. In this scenario, incumbent disintermediation may take place. Moody’s sees this scenario as “unlikely.”
For Moody’s predicted outcome, “Growth would be strongest in repurchase agreement collateral, MMFs, Treasurys, equities and ETFs, and segments of fixed income, for all of which tokenization can reduce settlement friction, speed settlement times, improve collateral mobility, and support continuous trading within the existing market structure.”
Moody’s believes that stablecoins will remain outside “mass market retail payments” while the most impactful progress will be made in the tokenization of institutional settlements, including treasuries and cross-border transactions.
Many of the regulatory issues are being addressed in the US, but implementation will take some time. While the GENIUS Act, payment stablecoin legislation, was signed into law, and the CLARITY Act finally looks like it will make it to a Senate vote, details need work, and becoming law does not always mean immediate action by institutions and mass utilization.