BlackRock’s Fink and Goldstein Say Tokenization Could Redesign Market Plumbing

BlackRock’s top executives say the financial system is on the cusp of its biggest infrastructure overhaul since the advent of electronic messaging in the 1970s, driven by blockchain-based tokenization.

In a new column for The economistBlackRock CEO Larry Fink and COO Rob Goldstein say finance is “entering the next big evolution of market infrastructure,” one that could move assets “faster and more securely than systems that have served investors for decades.”

Tokenization records ownership of assets on digital ledgers, allowing stocks, bonds, real estate, and other holdings to exist as verifiable digital records that can be traded and settled without traditional intermediaries.

The executives’ opinion fits perfectly with BlackRock’s tokenization agenda. remembering Fink’s 2022 statement that “the next generation of markets, the next generation of securities, will be the tokenization of securities.”

“At first it was difficult for the financial world, including us, to see the big idea,” the duo wrote, noting that tokenization “was entangled in the cryptocurrency boom, which often seemed like speculation.”

But behind that noise, “tokenization can greatly expand the world of investable assets” and “offers the potential to settle transactions instantly,” while replacing “manual processes, custom settlements, and record-keeping that have not kept pace with the rest of finance.”

Executives at the world’s largest asset manager warned that the technology will not immediately replace existing systems, describing it instead as “a bridge being built from both sides of a river” that connects traditional institutions with digital-first innovators.

A multi-cycle transition

Joshua Chu, lawyer and co-chairman of the Hong Kong Web3 Association, said Decipher that BlackRock “is probably right that tokenization will be part of the ‘next generation for markets,’ but the implied momentum is, in my view, potentially too compressed.”

“This is a multi-cycle transition where limited, well-regulated use cases will accumulate over time, not a one-cycle revolution where everything will be tokenized next year,” Chu said. “That’s just not how innovation works.”

“Tokenization absolutely has a place in modern finance,” he said, but emphasized that “it only holds up when it solves a real problem that a simple structure cannot,” whether by reducing liquidation risk, improving the mobility of collateral, or opening access to assets that were previously unattainable.

Growing but still incipient

Tokenized financial assets remain a portion of the global stock and bond markets. Still, they are expanding rapidly, about 300% in the past 20 months, Fink and Goldstein noted, comparing the current stage to “the Internet in 1996,” when Amazon had sold just $16 million worth of books.

The world’s largest asset manager is already moving toward that future with BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), which debuted last year and has grown to $2.3 billion, making it one of the largest tokenized assets globally, according to RWA.xyz data.

“We need to tokenize all assets, especially assets that have multiple levels of intermediaries.” Fink told investors during BlackRock’s third-quarter earnings conference call, citing real estate as a sector where technology could reduce costs and improve affordability by eliminating layers of middlemen.