Digital assets, including tokenized assets, are poised to change the entire financial ecosystem. Digitization through blockchain technology can eliminate the inherent friction in the movement of value while automating various services and activities. rating firm Moody’s published a report on how tokenization will change US transaction flows.
According to the report, there are three possible scenarios for how tokenization will affect financial services.
First, there is the “Continuous Growth base case,” where “tokenization begins to scale in certain assets but established asset managers, banks, and infrastructure providers retain central roles.” Moody’s says this is the most likely path. In this case, intermediaries will continue to exist.
Low Growth Mode is where tokenization is limited to narrow use cases and only minor changes are made to the financial ecosystem. This may be due to the lack of clarity in the legislation and the slowdown in demand. Moody’s thinks this has led to digital assets falling by the wayside.
The last possibility is a Rapid Growth scenario where stabilocin use increases dramatically and things change more disruptively. In this scenario, attendant disintermediation may occur. Moody’s sees this scenario as “unlikely.”
For Moody’s forecast, “Growth will be strongest in repurchase agreement collateral, MMFs, Treasurys, equities and ETFs, and fixed income segments; for all of these, tokenization can reduce settlement friction, accelerate settlement times, improve collateral mobility, and support continued trading within the existing market structure.”
Moody’s believes stablecoins will stay out of “mass market retail payments,” with the most impactful progress coming in tokenizing corporate payments, including treasuries and cross-border transactions.
Most regulatory issues are being addressed in the US, but implementation will take some time. While payment stablecoin legislation, the GENIUS Act, has been signed into law and the CLARITY Act appears set to finally make its way to a Senate vote, the details need to be worked out and passage does not always mean immediate action and mass adoption by institutions.
