Ten thousand words: Starting from 1996, who is laying the underlying tracks for the next generation of capital markets

Introduction: The Submerged Part of the Iceberg

This article is from Tiger Research. What the market calls asset tokenization is merely the tip of the iceberg. The real transformation is happening beneath the surface, where the trillions-of-dollars worth of traditional financial infrastructure rails are being fundamentally rebuilt.

Many observers equate tokenizing U.S. Treasury bonds with the entire RWA market, seeing only the surface. The true transformation lies not in the visible part of asset digitization, but in the comprehensive reconstruction of the financial infrastructure long hidden underwater: the clearing systems, settlement layers, and liquidity networks that form the underlying rails for every transaction.

The scale is already significant. According to Broadridge, its DLR platform processes approximately $7.7 trillion in on-chain repo transactions monthly; DTCC has also entered the Treasury tokenization arena. Neither is a pilot experiment; they are operational components of the financial market structure. The Hong Kong government issued HKD 6 billion in digital green bonds through HSBC Orion, immediately deploying them as repo collateral, demonstrating a future where issuance and circulation merge into a single, seamless process.

The infrastructure layer for new financial standards is being assembled right now. Institutions that join at this moment will help define the architecture itself before latecomers arrive.

1. 1996’s Internet and the RWA Market

BlackRock CEO Larry Fink wrote in his 2026 shareholder letter: "We believe tokenization today is roughly where the internet was in 1996."

1996 was an inflection point. The internet existed, but most companies held back. Only 26% of Fortune 500 companies had integrated online operations. Once early adopters demonstrated success, others rushed in, but by then, the pioneers had already secured their positions.

The RWA tokenization market is at a similar juncture. Many institutions are still watching, but leading examples are emerging. The most prominent is BlackRock's BUIDL (BlackRock USD Institutional Digital Liquidity Fund), an on-chain tokenized fund holding U.S. Treasuries. Launched in March 2024, it expanded to seven blockchains within 18 months. According to rwa.xyz data, the fund's market cap grew to approximately $2.5 billion.

Scale alone doesn't capture this shift. The market has moved beyond simply putting real-world Treasuries on-chain. New financial services are layering atop issued assets. Multiple DeFi protocols use BUIDL as a base asset, and Binance officially accepts BUIDL as trading collateral.

According to rwa.xyz, as of May 2026, on-chain issued assets (Distributed Assets) stood at approximately $34 billion, over 20 times the $1.5 billion at the start of 2020. Including Represented Assets (where physical assets are custodied and ownership recorded on-chain), the total reaches approximately $360 billion.

2. The RWA Market Has Launched

Asset tokenization isn’t just swapping existing financial products for digital forms. It changes the fundamental way products operate, including settlement speed, post-trade infrastructure, and the entire processing chain from start to finish. This approach doesn't aim to replace old systems but builds faster, more precise new rails on top of them.

Most discussions about RWA tokenization stop at BlackRock’s BUIDL. BUIDL is indeed a landmark case for the RWA market, but a single example cannot answer why tokenization matters.

Finance is more than just bond issuance. Repo markets, securities settlement, and capital raising each carry distinct structural inefficiencies that tokenization can unlock in different ways. To understand why tokenization is important, we must examine these sub-markets within their specific contexts.

2.1 Short-Term Funding Markets (Repo)

A repurchase agreement (repo) is the defining transaction in short-term funding markets. An institution lends cash against bonds as collateral, repurchasing them later at principal plus interest. Most contracts are overnight, collateral is safe, rates are low, and trades are routine.

Problem: Limited Operating Hours. The repo market operates only during system business hours. Settlements occur once daily on business days, halting entirely on weekends and holidays. But risk doesn’t take weekends off. If adverse news emerges over a weekend, mark-to-market losses accumulate while settlement is impossible. By Monday's open, the entire weekend's accumulated exposure hits as a single margin call. Responding immediately is impractical: selling bonds or raising cash via repo takes time. The only solution is holding cash reserves pre-emptively – capital forced to remain idle because settlement infrastructure cannot operate continuously.

Solution: DvP Mechanism for On-Chain Repo. On-chain repo structurally solves this, centered on the DvP (Delivery versus Payment) mechanism. It works like paying at a cash register: collateral and cash exchange simultaneously; it's structurally impossible for one party to transfer funds without the other.

In practice, a party seeking funds posts the amount, rate, and terms. A counterparty accepts. Both deposit their assets into a smart contract – a digital agreement that executes automatically when conditions are met. The borrower deposits tokenized bonds; the lender deposits tokenized cash. Once both confirm receipt, the exchange completes automatically.

Tokenized bonds and stablecoins move on-chain 24/7. Unfettered by legacy settlement infrastructure, collateral can be moved on Friday afternoon or Sunday morning, erasing the constraint of system operating hours. Settlement frequency changes too. Manual confirmation under old systems limits settlement to once daily; smart contracts trigger automatic margin calls and settlement the moment a position incurs a loss. Without time gaps, there’s no need for excessive cash reserves.

Case Study: Broadridge DLR.

Broadridge is a global capital markets infrastructure company, processing settlement and clearing for banks and brokerages via technology. Its DLR (Distributed Ledger Repo) platform is a distributed ledger repo trading platform built on the Canton Network's underlying blockchain.

Being blockchain-based, DLR is free from legacy settlement infrastructure’s operating hour constraints. Collateral moves and settlement execute on weekends and holidays; repo trades can be initiated and closed at any time of day. The risk inherent in limited operating hours is structurally mitigated. Smart contracts automate the entire repo lifecycle, reducing settlement failures and disputes while enhancing collateral re-usability.

As of April 2026, DLR processed $7.7 trillion in monthly settlement volume, with an average daily volume of $368 billion. Global banks including HSBC, UBS, and Société Générale participate on the platform.

2.2 Securities Settlement Infrastructure

Securities settlement is the post-trade phase where the buyer delivers cash and the seller delivers securities. "T" denotes the trade date. Standard practice settles on T+1 or T+2, meaning funds move at least one to two days after the trade.

Problem 1: Settlement Delays & Counterparty Risk. Real estate transactions offer a helpful analogy. Signing a purchase contract doesn't immediately transfer title or finalize payment; these happen days later. Trade execution and asset transfer occur at different times.

Similarly, existing securities settlement infrastructure creates a time gap between trade execution and asset transfer. If a counterparty defaults within this window, significant losses can occur. Central Counterparty Clearing Houses (CCPs) exist to prevent this. A CCP interposes itself between buyer and seller; if one defaults, the other isn't directly exposed. In the US, NSCC plays this role; in Korea, it's the clearing and settlement division of the Korea Exchange (KRX).

Historically, no CCP has completely defaulted, because the systemic consequences of a CCP failure are so severe that member institutions and governments intervene before it happens. But extreme market conditions have pushed CCPs to their limits. During the 1987 Black Monday crash, the Hong Kong Futures Exchange clearing house neared bankruptcy due to massive margin call failures, requiring a government bailout and a four-day market halt. During Lehman Brothers' 2008 bankruptcy and the 2018 Nasdaq clearing crisis, some loss absorption funds were indeed depleted.

Problem 2: Fragmented Ledgers & Reconciliation Costs. When an equity trade executes, the issuer, custodian, clearing house, and settlement institution each record it in their own separate ledgers. The same trade is entered four times across four institutions. Since these ledgers aren't synchronized in real-time, they must be matched post-hoc using standardized message formats. This process is called reconciliation.

Ledgers don't always match. Each institution processes the same trade at a different time; internal system format differences can cause data loss or alteration during message conversion. When records are inconsistent, staff must manually investigate and correct discrepancies. While some steps are automated, errors remain frequent. This is why the personnel and system costs for reconciliation and position discrepancy handling persist. Corporate actions (events affecting company structure or shareholder rights, like dividends, stock splits, M&A) further increase complexity, requiring each institution to independently update its ledger and re-reconcile, multiplying the workload.

Solution: Shared Ledger + Atomic Settlement. Putting securities settlement infrastructure on-chain changes two things: all participants see the same ledger, and trade execution and asset transfer happen simultaneously.

A shared ledger means each participant's data updates simultaneously when a trade is recorded, eliminating post-trade reconciliation. Placing cash and securities in the same environment removes the settlement delay that creates counterparty exposure. When both cash and securities are on-chain, trade execution and asset transfer can be bundled into a single transaction. Currently, cash flows through the banking system, and securities through central securities depositories – separate systems. On-chain, both exist in the same environment and execute simultaneously.

This is atomic settlement: all conditions must be met for the entire transaction to succeed; if any condition fails, the entire transaction cancels.

Case Study: DTCC.

On-chain securities settlement is already operating in live trading. The London Stock Exchange Group (LSEG) deployed its digital settlement platform, DiSH, on Canton for securities settlement. Lloyds Banking Group completed a transaction using tokenized deposits to purchase tokenized UK government bonds, processing the entire process from issuance to settlement on-chain.

The most significant case is DTCC. The Depository Trust & Clearing Corporation is the core infrastructure for US securities settlement, handling clearing and settlement for the majority of US-traded securities. DTCC, in partnership with Digital Asset, the company behind the Canton Network, obtained a no-action letter from the SEC in December 2025 – a pre-commitment from the regulator not to take action regarding specific activities. The goal is to launch an MVP (Minimum Viable Product) in the first half of 2026.

DTCC is an institution that could lose its license with a single settlement failure. Its decision to adopt on-chain infrastructure is by no means a casual experiment. It represents a calculated judgment: the risks embedded in the current settlement architecture have surpassed the operational risks of migrating to a new rail.

2.3 Capital Raising Markets

Capital raising markets are where governments and companies issue bonds and equity to raise funds. They consist of a primary market (new securities issuance) and a secondary market (trading and deploying issued securities among investors). Bonds represent a promise to repay principal plus interest; equity grants holders ownership stakes in the issuing company.

Problem 1: Issuance Process Delays. The longer the preparation period, the more variables outside the issuer's control accumulate. Hedging costs rise, investor demand may shift, and in the worst case, the deal falls through entirely. Every additional week on the timeline exposes the issuer to an additional week of market conditions beyond their control.

Problem 2: Fragmented Collateral System. Institutional investors buy assets for yield, but the real question is what happens next. If purchased assets can be deployed in repos, used as collateral, or linked to other transactions, capital keeps working. The smoother these connections, the more transactions a single asset can support, making the asset more valuable from the issuer's perspective.

However, even when counterparties agree on collateral use, execution is difficult. Collateral transactions require sequential eligibility verification, haircut calculation, and title transfer. Each step involves different institutions whose systems aren't interconnected. At each stage, staff must send messages and wait for confirmations. In this structure, a significant gap exists between the face value of issued assets and the amount practically deployable.

Solution: On-Chain Issuance.

The entire issuance process runs on smart contracts. Agreed issuance terms are defined in code, within regulatory parameters. After KYC and AML verification, subscription registration, allocation, and payment settlement are automated. This eliminates manual confirmations and message conversions, significantly compressing the issuance cycle.

The post-issuance deployment structure also changes. Tokenized assets exist in an environment where all participating institutions share the same data in real-time on the same network. Collateral transaction processes – eligibility verification, haircut calculation, title transfer – are handled in a single workflow, without shuttling between independent systems. The separate ledgers once maintained by issuer, underwriter, depositary, and collateral manager merge into one. Once issued and adopted, an asset can immediately serve as collateral or base asset for other transactions.

This model presupposes issuance privacy. Issuance terms, underwriter allocations, subscription prices, and investor lists are data that cannot be public to the market. Leakage causes pre-market price volatility, imposing higher costs on the issuer. Existing public permissionless blockchains only hide wallet addresses while exposing all transaction data to everyone. For on-chain issuance to scale, it must run on permissioned infrastructure where transaction data is visible only to relevant parties.

Case Study: HSBC Orion. HSBC, a UK-headquartered global bank with $3 trillion in assets, is a leader in bond underwriting and issuance. It launched its own digital asset platform, HSBC Orion, in 2023 as a digital bond issuance infrastructure, running on the Canton Network.

In February 2024, the Hong Kong government issued HKD 6 billion (approx. $770 million USD) in digital green bonds via HSBC Orion. This was the first multi-currency digital bond issued by a government, covering HKD, offshore RMB, EUR, and USD. Over 50 global investors from eight nationalities participated – an exceptionally broad base for an early digital bond issuance. The settlement cycle was compressed from T+5 to T+1.

The significance of this issuance lies not in the issuance itself, but in what happened next. Within days of issuance, HSBC and Bank of East Asia (BEA) executed a repo transaction using the digital green bond as collateral. The moment the bond launched on the market, it was directly put to use as collateral on the same network. This is the first confirmed case of issuance and deployment linking seamlessly without interruption.

Its structure: When HSBC Orion issues a digital green bond, the bond is recorded as a token in the Bond Registry on Canton. When HSBC and BEA execute the repo transaction, another application on the same Canton Network uses that token as collateral and simultaneously settles the payment.

The Hong Kong government did not treat this issuance as a one-off event. The Hong Kong Monetary Authority subsequently launched a Digital Bond Subsidy Scheme, committing to subsidize half the issuance cost for digital bond issuers, transforming a single experiment into a standard for market infrastructure.

2.4 Stablecoins and Payments

Stablecoins are digital currencies pegged 1:1 to the US dollar. Unlike regular cryptocurrencies, their value is generally stable, allowing them to function like money circulating on a blockchain. USDC and USDT are the most typical examples.

Problem 1: Completely Public Transaction Data. On public blockchains, all transactions are visible to everyone. Who sent how much to whom and when, and their balances, are instantly retrievable by searching a wallet address on a block explorer. Analyzing a company's stablecoin payment history can reveal unit prices negotiated with counterparties, seasonal revenue patterns, timing of new market entries, M&A fund flows, and executive compensation. The efficiency gains in payments are clear, but completely public transaction data is a structural limitation.

Problem 2: Disconnection from Internal Systems. When a company receives a stablecoin payment, the funds arrive at a blockchain wallet completely