From Pilot to Scale: Integrating Tokenized Assets into the TradFi Core & Closing Remarks

Tokenization initiatives are moving beyond proofs of concept toward institutional-scale  deployment. The question now: how do traditional financial institutions integrate tokenized  assets into their core systems, distribution channels, and client strategies? This forward looking panel will cover integration challenges with legacy infrastructure, opportunities for  partnerships with fintechs and blockchain consortia, and models for liquidity creation,  including tokenized money markets and DeFi bridges. The panel will also look ahead to  what's next—programmable assets and the convergence of AI with digital securities. The  panelists will outline the path from experimentation to revenue generation and competitive  advantage in the tokenized economy. 

Transcription: 
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record. 

Jack Kubinec (00:13):
Well, hello, hello. Welcome everyone. We're very excited to be here with the American Banker discussing tokenization, a very buzzy topic, a very fun topic to dive into. I'm Jack Kubinec. I was a journalist for two years covering crypto and tokenization and how crypto systems have entered Wall Street. I was formerly at Blockworks. I'm joined today by Robin from Uphold and Bernhard from BCG, two panelists with a lot of expertise in this topic. So I'm very excited to dive into it. Thank you guys for joining me on the panel today.

Robin O'Connell (00:53):
Well, thank you for having us.

Dr. Bernhard Kronfellner (00:56):
Indeed. Great to be here.

Jack Kubinec (01:00):
Robin, maybe let's start with the bottom line upfront. I think that there's a lot of theoretical things you could say about tokenization, but I've seen that Uphold is making more practical steps recently in the area. You filed an application to offer tokenized securities. You partnered with Tzero, which I think was one of the few firms to get a special license under the Biden administration, if memory serves. ¹ So kind of a crypto OG there. Why did you make the decision to file and what do you foresee that tokenized security product being for customers?

Robin O'Connell (01:45):
Fantastic. Well, first of all, let me give a little bit of overview on Uphold and then specifically what my group does as it relates to all of this, and then I'll get to your question. If you don't know, Uphold is a digital asset platform, been around for almost 12 years. ² Really from the get-go, we're highly regulated. We're regulated in the United States through MTLs, UK through FCA, VASP in Europe, and et cetera, et cetera. So we have a consumer side of the business. Our consumer side serves over 10 million individual and business users. ³ It's really an app that allows users to connect from their traditional bank to our app in order to buy, sell, hold different digital assets and then partake in some benefits of DeFi. It's a big business just on the consumer side, but what's underneath that is a platform that we've developed over 12 years that has a sophisticated payments layer, liquidity layer, KYC compliance layer, and blockchain and custody layers.

(03:19):
Then what our group does—I'm the CEO of the enterprise unit. The enterprise unit effectively works with other companies: banks, fintechs, neobanks, brokers, and even other crypto companies where we're providing that infrastructure that I just described to them. ⁴ As an example, the IG Group is an old broker in the UK. ⁵ They didn't have the right license or infrastructure to launch crypto, but they have many great and loyal customers who use them to buy and sell stocks, and they wanted to get to market quickly; we can allow for that. It's sort of the difference between build or buy. You can build the whole infrastructure stack yourself, and I don't think many banks are really going to want to do that. Now to your question: as a part of that, we provide lots of capability. For starters, a bank may be interested in giving exposure to their end users for, let's say, Bitcoin.

(04:37):
That's a process where we can embed our systems into the bank's infrastructure to be able to support that. But everything that we have on the consumer side is available in our stack. While somebody may want to start with just giving crypto exposure, we have lots of different end user benefits like staking and lending products. Even in the US, we have a debit card where the user can spend directly, earning rewards and using their crypto balance as the source. You can imagine—I'm holding up my phone here—sort of the next generation bank having more than what we have today and offering the next generation access to all of these different things. Long-winded way to get to your question: we believe that tokenized stocks is a key element of what our end users want, both on the consumer side and also with the customers that we're embedding into.

(06:03):
Once we've embedded and we're offering a buy-sell-hold of crypto, what's next? Is it staking, or is it offering tokenized stocks? The last thing I'll say is there's more than just the tokenized stock stuff that we're doing here at Uphold. There are other real-world asset classes where other companies want to support things like commodities—a gold token, a silver token, or even an oil token requires some of the infrastructure that we have. We're working with those types of projects as well.

Jack Kubinec (06:59):
Very interesting. One other note I wanted to make is that I believe there's a chat open, so please make my life easier and send questions. There are no dumb questions here. Robin, maybe a quick follow-up.

Robin O'Connell (07:20):
Sure.

Jack Kubinec (07:21):
You're offering tokenized securities to US investors. I could see someone who's been around finance for a while saying, "Look, the security system as it exists works all right." For US investors, you can just go buy stocks through your brokerage or on Robinhood. What is your pitch for why US customers would want access to tokenized securities? Why is that a superior trading experience relative to the infrastructure that currently exists?

Robin O'Connell (08:03):
24/7, 365. That's what's being expected by the next generation. The notion of having markets open in limited windows and not on the weekends is a fundamental difference between the traditional stock market and crypto itself. Crypto is a 365, 24/7 global market. I think that tokenization is important because it's going to take assets that aren't available like that and open up access to people in the United States or across the globe that they would never get access to. A lot of this is—and this is an overplayed statement—the democratization of assets and the accessibility of different investment assets to all people in the world. But I think the main benefit is just the instant nature of it and the 24/7, 365 availability.

Jack Kubinec (09:26):
Yeah. Well put. Bernhard, I want to bring you in here. We've talked a bit about tokenized securities, but there are many types of assets people are tokenizing—from US treasuries, which is basically what most stablecoins are, to credit. Private credit is a big market; I think Apollo has been big there. I met a guy once who's tokenizing government receivables. It's opened up this interesting frontier. What are you personally most bullish on? What asset class do you think is most ripe for tokenization?

Dr. Bernhard Kronfellner (10:21):
Very good question. As BCG, we are very deep in the tokenization and general digital asset business, be it on stablecoins, brokerage, or what have you over the last seven or eight years. We are now consulting for everyone from banks to regulators to crypto companies and blockchains directly. What is my bet on what works best? In the past, it started with some assets that were hard to get on a global scale, then including some collectibles. Over the last one or two years, I saw a big rise in money market funds, wholesale banking in general, and in tokenized bonds.

(11:31):
Now, if I can call this tokenized money, which is stablecoins—that's the big summary at the moment. When I look ahead, I would say that more and more banking products directly will be tokenized, but also many things that we cannot think of at the moment because tokenization is a wrapper. It's a legal wrapper, a tech wrapper, and also a wrapper where people have the infrastructure. This will accelerate even further as everything comes together now. You have the infrastructure more and more in banks, you have the regulation in place in the most important countries already, and you have the need from clients and banks as providers.

(12:29):
Most products that banks are exchanging at the moment will soon be in a tokenized way. Also, many products we have as human beings could be tokenized in order to exchange them quicker and easier, as long as we don't need to eat them or wear them.

(13:13):

But even eating it—one of my clients is a wine tokenizer. Wines can be an investment case or just something to have. He wants to sell to wine collectors in Japan from France. In the past, he had to ship it, insure it, and so forth. Now he just sells the token and that's it. There will be so many business and use cases ahead of us with this new wrapper that we cannot even think of at the moment.

Jack Kubinec (13:49):
Okay. That's a good overview. Bernhard, maybe a quick follow-up just to summarize. What to you is the core problem that tokenization solves? A lot of these things could be done on traditional rails with a big database as opposed to using a blockchain. Looking forward, what actual problem do you foresee tokenization solving for people?

Dr. Bernhard Kronfellner (14:47):
First of all, you can have a worldwide client base. What Robin said before for tokenized equities is definitely a topic because you can offer everyone equities globally; they're not limited by borders or jurisdictions as much. Second, it is just faster and cheaper to buy and sell your assets on-chain 24/7 with much less cost. For instance, look at real estate tokenization. You could imagine a use case where you tokenize your mortgage—partly from the bank, partly maybe from your family or friends. They get the tokens directly. At the end of the month, you pay them back and basically buy back tokens of your own house without needing to go to the notary all the time.

(16:00):
This shows how cost efficiency in the entire process brings new business models. It is also a question of how to store the asset. Especially with real-world assets, coming back to the wine example, many people buy the tokens only and not the bottle because they don't have the capability of storing wine at home but still want to speculate or own it. Then of course there is fractional ownership and trust in the system. There's a broad range of advantages when you have tokens compared to the transfer of ownership we have seen for real-world assets and securities in the past.

Jack Kubinec (17:20):
I think it's always important to stress what net new kinds of businesses this tech enables. Robin, let me throw it back to you. As CEO of enterprise at Uphold, the consumer use cases are kind of apparent, but when you look at enterprise clients, what's top of mind for them? What are the risks they ask about?

Robin O'Connell (18:28):
"Enterprises" is a big term that covers just about everything non-consumer. The types of enterprises we're working with are the companies themselves that need our infrastructure in order to launch crypto or real-world assets to their client base. We have a huge variety of businesses on our platform. Some just want exposure to Bitcoin. Others use us for treasury purposes and sending money cross-border. Really, the primary use for our business unit is a company that, let's say, wants to launch a silver coin but doesn't have the infrastructure or the right licenses to do it.

(19:34):
We do. Instead of us coming up with the next use case, we're fielding opportunities. That wine one is pretty interesting—please send them our way. Those companies come to us because we're the picks and shovels or the underlying infrastructure needed to make that value proposition happen. We don't want to waste our time integrating something that has a needless use case.

(20:43):
I thought Bernhard did an excellent job. I see one of the questions in the chat is related to the straight-up value proposition—why this is better than trading stocks normally if the user doesn't care about weekends or California market close times. It's not going to necessarily solve every single use case for everybody, but it's certainly going to do the things Bernhard mentioned: opening up markets globally, 24/7, 365, and accessing markets that couldn't be accessed before. Even in the United States, it's not easy to access certain private equity investments. Those things are getting tokenized. That's a real advantage. It's giving the average Joe the ability to trade the same way that Nancy Pelosi does.

Jack Kubinec (22:14):
And another piece of that is risk and compliance. When you go to a business and suggest they tokenize, one of the questions they probably ask is, "Am I going to have the SEC coming after me?"

Robin O'Connell (22:33):
That's huge. If you're talking about tokenized securities, you are talking about the SEC. If you're talking about tokenized commodities, you're talking about the CFTC. They have different rules and platforms have different abilities to access those markets. As an example, we don't have the right through FINRA today to offer tokenized securities; that's why we're partnering with Tzero. We may get that—we own a broker-dealer in New York—but commodities we absolutely can support. There are certain things that are clearly investments.

(23:51):
Real estate on the surface doesn't sound like an investment, but if it's presented that way, you need special licenses. We may or may not be able to support it based on the use case. The custody of this stuff is also super important. Working with a partner like us, we're connected to all the big names like Ledger or Fireblocks. Getting the regulation right involves orchestration. For instance, if someone's buying a silver token, some of these things are orchestrated where the digital asset is the actual ownership contract. This is going to sound nerdy, but a certain type of Ethereum called ERC-3643 has the element to actually have the smart contract where the token itself is the contract. ⁶

(25:09):
Whereas if it's just an ERC-20, it's a representation of a real-world asset, which is different. Most stablecoins are representations of the US dollar, not an actual US dollar. Those nuances are important. Back to ERC-3643: you need to know 100% that it's Jack signing that contract. You have to have the right KYC and compliance in place to know that, and you need a system like ours.

Jack Kubinec (25:58):
That raises a good point for Bernhard regarding the tech side. If I wanted to tokenize a mineral rights business, I have to choose a blockchain. Some have more liquidity, like Ethereum or Solana. Some are cheaper, like Base, which rolls up data to a layer two network. ⁷ There are also liquidity incentives. How do you think about which blockchain people interested in tokenization should choose?

Dr. Bernhard Kronfellner (27:18):
If I may answer your tech question with a business answer, I think it fits better. On the tech side, most newer blockchains are capable of doing this. The question is not really the tech. This also makes the blockchain technology stack successful because it's actually rather quick to implement and relatively cheap. It kind of becomes a commodity—the transaction itself. That's why it became much more important on the business side which ecosystem you buy into.

(28:16):
If you want to tokenize collectibles, that's a different ecosystem than tokenizing securities, mineral rights, or sustainability topics. Each blockchain opens a certain ecosystem with synergy effects with other builders and companies. If you want to be in the sustainability area, there are two or three blockchains like Vechain that are on the forefront. If you want to be in the financial service industry, you have Aptos, Hedera, and also Solana to a certain extent that already are dealing with similar topics and have gathered a certain ecosystem.

Jack Kubinec (29:38):
It's an interesting point that the tech may become commoditized. Robin, did you have something?

Robin O'Connell (29:54):
I'm curious, Bernhard—the notion of the contract itself embedded into the token with ERC-3643. How important do you think that is versus just having a notional representation? To me, it's similar to a stablecoin, which is a notional representation. If you're in the game, you know what's behind it—like Trust or Circle—but there's no contract per se; everybody just believes in it, so it has value.

Dr. Bernhard Kronfellner (31:04):
Regarding the stablecoin topic, it's not like you only need to trust Circle. Depending on the regulation, you need to trust the collateral behind it. In the US, you have T-bills, cash, or high-quality liquid assets. In Europe, you have deposits of another bank or central bank deposits because the banking lobbying was better there and they put this into MiCA (Markets in Crypto-Assets Regulation). For a stablecoin, you don't need to trust the issuer. It's not an algo-backed stablecoin; you have 100% collateral behind this.

(32:36):
The other point you raised goes into the discussion of possession versus ownership. In banking or DLT assets, when you write this into a smart contract—if X happens, the asset goes to another owner—the possession is still on-chain. The question is: who possesses that asset now? It sounds philosophical, but from a legal point of view, it's an interesting discussion. In the traditional world, you normally have possession and then you are the owner. Differentiating both for good reasons is important. If you put something under custody, someone else possesses it but you are still the owner. But what do you do when you have a smart contract that is sitting unchanged and you aren't there yet to trigger it?

Robin O'Connell (34:32):
That's really good. Appreciate it.

Jack Kubinec (34:35):
For our last couple of minutes, we'll turn to audience questions. Rapid fire. Robin, this one is for you: "Can you speak to what you were doing with tokenizing energy and what is the future outlook for that in the United States?"

Robin O'Connell (35:04):
There's a company we're working with that's tokenizing oil. They've come up with a way to work with oil that's above ground and waiting for transport. Producers don't make money on that while it's waiting, but they can tokenize it and have contracts around ownership, offering that up as spot oil value. It's a two-sided market. It gives the owner of the asset the ability to essentially make money and offer rights to third parties, which is a huge economic benefit for the oil company.

(36:24):
For buyers, there are benefits to accessing digitized oil that you don't get in traditional markets. Once you digitize that asset, you could borrow against it and do other financial things. This is true across many industries. I'll throw a wild one at you: I'm a part owner in a ranch, and we have "frog credits" for mitigation banking. People, the government, or developers are required to buy them when they're developing. We're sitting on 600 frog credits in California. There's a market for that and the price is going up each year. You could create a market that wasn't there before to benefit the owner. You can take really anything of value, digitize it, and open up a whole new market assuming there's demand.

Jack Kubinec (38:28):
Got to get my hands on some frog credits. Bernhard, last question: "How would you recommend a bank with old legacy systems integrate with crypto?"

Dr. Bernhard Kronfellner (38:56):
If you haven't started yet, get started. You might end up in a parallel run for the short term, but in the long term, you'll figure out the newer system is much quicker. Then you have a discussion about shutting down the old system and going only on an on-chain banking system. This won't be tomorrow because many clients are still on traditional rails, but it can happen gradually, product by product. Start with wholesale banking topics like money market funds, treasuries, and repo markets. You'll figure out you can switch off the old system and save money. The worst thing to do is neglect the on-chain banking movement happening now. Larry Fink wrote a famous article two weeks ago exactly on this topic—that a lot of banking activities will be on-chain.

(40:45):
Digitalization happened over time after the breakthrough of the World Wide Web. I guess a similar thing will happen with on-chain.

Robin O'Connell (41:28):
The big banks are already doing it. For small to medium-sized banks, they are relying on infrastructure providers like Jack Henry or Fiserv. You can't just integrate with crypto yourself if you're a community bank; you rely on technology partners. We've been working with those partners, and some companies are doing the heavy lifting of building on top of those infrastructures. They utilize us because we can instantly go in and out of Bitcoin.

(42:40):
They are the ones actually selling to and signing up the banks. That's our play—being the infrastructure provider to those companies. It's happening. Talk to your current technology partners because they are integrating systems like ours to make it easy for banks to offer these services.

Jack Kubinec (43:26):
We've run a few minutes over, but that's what happens when you talk tokenization. Robin and Bernhard, thank you so much for joining us.

Robin O'Connell (43:40):
Thanks so much for having me. Nice to meet you, Bernhard. I learned a lot from you.

Dr. Bernhard Kronfellner (43:46):
Likewise. Great talk.

Jack Kubinec (43:52):
Thank you, guys. Before you go, a quick reminder: keep the good times rolling at American Banker OnChain, a new invitation-only executive summit, March 19th and 20th in New York City. ⁸ Learn more about integrating tokenization and stablecoins into your business. Thank you, everyone.

Robin O'Connell (44:22):
Thank you.