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Banks are drawn to blockchain technology for its ability to “tokenize” traditional assets such as stocks and Treasury bills, which makes trading them faster and cheaper. Critics say Wall Street institutions aren’t just adopting, but co-opting the technology to generate fees — similar to how financial firms turned low-cost, low-touch exchange traded funds into a healthy business.
US banking regulators are yet to greenlight innovations such as deposit tokens and have worried that instant settlement could spur bank runs. That’s because customers would be able to use the programmable tokens to automatically withdraw funds from banks when bad news hits. But regulators in other parts of the world, such as Singapore, are working with financial institutions on tokenization pilots for, among other things, cross-border payments.
