Tokenization and digital assets: Transforming the asset and wealth management industry

The financial industry is undergoing a profound transformation, driven by the rise of digital assets and tokenization. These innovations are reshaping how assets are managed, traded, and owned, presenting both opportunities and challenges for asset and wealth managers. In this article, Xavier Gomez, Chief Operating Officer at Vancelian, explores the concept of tokenization, the latest trends in digital assets, and how the industry must evolve to remain competitive in this rapidly changing landscape.

Understanding tokenization

Tokenization refers to the process of converting ownership rights of an asset – whether physical or digital – into digital tokens stored on a blockchain or distributed ledger. These tokens represent fractional ownership of the underlying asset, making it more accessible and liquid. For example, a $500,000 property could be tokenized into 500,000 tokens, each representing 0.0002% ownership. Investors can buy these tokens on blockchain-based platforms, enabling fractional ownership without the need for intermediaries.

The benefits of tokenization are significant:

• Increased liquidity: By fractionalizing assets, tokenization allows for easier trading on decentralized exchanges, even for traditionally illiquid assets like real estate or fine art.
• Transparency: Blockchain’s immutable nature ensures that ownership records are secure and tamper-proof.
• Cost efficiency: Tokenized transactions reduce reliance on intermediaries, cutting down administrative costs and speeding up settlement times.
• Democratization of investment: Smaller investors can access high-value assets that were previously out of reach.

Tokenization is not limited to real estate; it spans diverse asset classes such as corporate bonds, carbon credits, collectibles, and even intellectual property. As this technology matures, it is poised to redefine traditional financial systems.

Trends in digital assets and adoption by asset managers

The adoption of digital assets is accelerating within the asset and wealth management community. Here are some key trends shaping this space:

Cross-chain interoperability

Cross-chain interoperability is emerging as a critical enabler for seamless movement of digital assets across different blockchain ecosystems. This reduces fragmentation and simplifies portfolio management for wealth managers handling both traditional and digital assets. For instance, clients can now integrate cryptocurrencies with conventional investments like equities or bonds into a unified portfolio.

Smart contracts

Smart contracts – self-executing agreements coded on blockchains – are transforming how transactions are executed. They automate processes such as dividend payments or asset transfers without intermediaries, enhancing efficiency and transparency. Wealth managers are leveraging smart contracts to manage complex portfolios involving real estate or private equity investments.

Artificial intelligence (AI) in portfolio management

AI-driven insights are becoming indispensable for managing digital assets. By analyzing vast datasets, AI helps identify market trends and optimize investment strategies. This is particularly valuable as the digital asset market grows more complex.

Institutional adoption

Digital assets are transitioning from speculative investments to mainstream financial instruments. According to a 2024 study by State Street, institutional investors anticipate significant revenue gains (up to 49%) and cost savings (up to 50%) from integrating digital assets into their operations. This shift underscores growing confidence in blockchain technology as a tool for operational efficiency.

Regulatory momentum

Regulators worldwide are increasingly engaging with the digital asset ecosystem to provide clarity and foster innovation. While challenges such as legal complexity remain, regulatory frameworks are evolving to accommodate tokenized securities and decentralized finance (DeFi) models.

How the industry needs to evolve

For asset and wealth managers to become key players in this field, they must adapt their operating models and embrace technological innovation:

Modernizing technology stacks

Traditional asset managers often operate with fragmented technology systems that hinder efficiency. Integrating blockchain-based platforms with existing systems is essential for scaling operations across asset classes. For example, J.P. Morgan’s Tokenized Collateral Network enables near-instantaneous transfers of tokenized securities while maintaining compliance with custodial requirements.

Educating stakeholders

Wealth managers must bridge the knowledge gap between generations of investors. Younger clients often view digital assets as integral to their portfolios, while older clients may require education on their benefits and risks. Clear communication will be vital in building trust.

Embracing decentralized finance (DeFi)

DeFi offers opportunities to rethink traditional financial services by eliminating intermediaries in lending or trading activities. While not yet fully integrated into regulated finance, DeFi presents a vision for more transparent and resilient financial systems.

Building expertise in digital assets

Firms need dedicated teams specializing in blockchain technology, regulatory compliance, and cybersecurity to navigate this complex landscape effectively.

Collaborating with regulators

Active engagement with regulators will help shape policies that support innovation while ensuring investor protection. Collaborative efforts can also standardize practices across jurisdictions, reducing legal uncertainties.

Tokenization in action

To illustrate tokenization’s potential:

• Real estate: A luxury apartment building could be tokenized into millions of shares available for purchase by retail investors worldwide.
• Art: High-value artworks can be fractionalized into tokens traded on decentralized marketplaces.
• Corporate bonds: Tokenizing bonds automates interest payments via smart contracts while reducing administrative overheads.

These examples demonstrate how tokenization democratizes access to traditionally exclusive markets.

Digital assets are the result of this tokenization process, representing these tokenized rights as tradable digital instruments. This link allows asset managers to modernize investment protocols, broaden market access, and create new, diversified investment products. Tokenization also supports operational efficiency by automating processes and enabling near real-time transactions, while regulatory frameworks are evolving to accommodate these innovations.

Institutional adoption is growing rapidly, with major financial institutions and governments deploying tokenized assets for collateral management, bond issuance, and mutual funds. This momentum is transforming global finance by overcoming fragmented legacy systems, increasing market liquidity, and enabling 24/7 access to a wider range of assets.

Tokenization is the foundational technology that converts traditional assets into digital assets, unlocking unprecedented liquidity, transparency, and efficiency. This integration is reshaping asset and wealth management by democratizing investment access, improving operational workflows, and fostering innovation across financial markets.

To conclude, tokenization and digital assets represent a paradigm shift for the financial industry. By embracing these technologies, asset and wealth managers can unlock new revenue streams, enhance operational efficiency, and democratize investment opportunities. However, success will require bold steps: modernizing infrastructure, educating stakeholders, engaging with regulators, and building expertise in this emerging field. In Vancelian, we want to democratize the access to tokenization and digital assets to investors and corporates.

As we look ahead, those who adapt quickly will not only survive but thrive in this transformative era of finance. The future belongs to those who innovate, and tokenization is paving the way forward.

Who dares wins!

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