Building the Foundations of Trust: Custody’s Role in the Next Phase of Tokenised Markets

As the tokenisation of real-world assets moves into production across institutional markets, activity is shifting from isolated pilots into live environments. Funds, fixed income instruments and other traditional asset classes are already being issued, transferred and settled on-chain. BlackRock’s BUIDL, Franklin Templeton’s BENJI and national initiatives like the UK’s DIGIT gilt issuance or Hong Kong’s tokenised green bonds are no longer proof-of-concept, they are live deployments. The conversation has moved beyond whether tokenisation works to how it operates within the broader financial system.

With this shift comes a new set of questions. Tokenisation enables more efficient issuance, transfer and settlement, including T+0 automated settlement, programmable compliance and fractional ownership of previously illiquid asset classes. But these benefits only become meaningful if they can be delivered within trusted frameworks, with the same levels of certainty, control and oversight that institutions expect from existing market infrastructure.

From Capability to Institutional Confidence

The technical foundations of tokenisation are maturing, but the frameworks that underpin trust are still actively developing. Legal treatment of digital assets remains inconsistent across jurisdictions — particularly on questions of ownership, record-keeping and enforceability. Infrastructure choices between public, permissioned and hybrid blockchain models remaingenuinely contested. And regulatory approaches continue to diverge: MiCA, the UK’s FSMA regime, and the US GENIUS Act each reflect distinct philosophies for integrating digital assets into financial systems, creating real complexity for cross-border activity.

This fragmentation does not prevent activity, but it does limit confidence and the ability to scale. Institutions need clarity on how assets are recognised, how rights are enforced and how records are maintained across jurisdictions. Without this alignment, tokenised markets cannot operate with the consistency required for broader adoption, and the benefits that make tokenisation compelling remain partially unrealised.

Operational Integrity as the Foundation of Trust

As tokenised assets move into production environments, operational requirements become more significant. Programmability enables greater automation, but it also introduces new forms of risk that require new forms of governance. Real-time settlement changes how liquidity is managed. The coexistence of on-chain and off-chain systems creates challenges around reconciliation, reporting and the maintenance of a single authoritative record. This is a challenge that is particularly acute where dual registers are still required by counterparties or regulators, even where DLT-native models are legally permissible.

These considerations directly shape the ability to establish trust. Institutional participation depends on demonstrating control, transparency and resilience, and on the ability to align new infrastructure with governance and risk management processes that are already well established. Whether tokenisation can scale beyond controlled environments depends significantly on how well new operational models integrate with existing institutional workflows, rather than requiring institutions to rebuild them.

The Role of the Settlement Layer

Trust in tokenised markets is also shaped by how value moves. Stablecoins, tokenised deposits and other forms of digital cash are increasingly being used to support subscription, redemption and settlement processes. In some markets a flywheel effect is already visible, where the growth of tokenised funds drives demand for regulated stablecoin settlement rails, which in turn enables broader participation in tokenised asset markets.

However, these instruments are not interchangeable. Stablecoins and tokenised deposits carry different implications for counterparty risk, reserve composition, regulatory treatmentand operational design. The quality of a stablecoin’s backing, its asset segregation arrangements and its disclosure standards all affect its suitability within institutional workflows. These distinctions matter for how custodians evaluate and support different settlement instruments, and they matter for how confidently institutions can rely on the cash leg of tokenised transactions.

As a result, confidence in tokenised markets is not determined solely by how assets are represented, but also by how reliably and safely value can be transferred between participants across systems and jurisdictions.

Custody and the Application of Trust

In this environment, the role of custody extends well beyond traditional safekeeping. It operates at the intersection of legal ownership, operational control and settlement, ensuring assets remain secure, segregated and accessible while supporting activity across multiple networks and interacting with different forms of digital money. In practice this means managing access to private keys, enforcing governance controls, conducting due diligence on supported tokens, maintaining asset segregation and providing the operational resilience required across both public and permissioned infrastructure.

Custody has become the mechanism through which trust is operationalised in tokenised markets. It does not remove the underlying complexity, but it provides the structure that allows institutions to engage with that complexity within frameworks they recognise and can rely on.

Defining the Next Phase of Tokenisation

Tokenisation is already changing how assets are issued and transferred, but its progression into institutional markets depends on more than technological capability. It requires alignment across legal recognition, operational models and settlement infrastructure – and it requires regulators and market participants to work toward greater consistency, particularly on the legal status of digital registers, cross-jurisdictional recognition of custody arrangements and the capital treatment of tokenised settlement instruments.

The development of these foundations will determine how tokenised markets evolve from isolated implementations into integrated components of the financial system. Trust is not embedded in the technology itself, but in how these systems are designed, aligned and maintained, and in the frameworks that allow them to operate consistently at scale.