🔗 Tokenization’s “Same but Better” Moment: From 19 Intermediaries to 3

DeFi Is Alive — And So Is Tokenization

Live energy from DeFi Day at EthCC underscored a simple truth: despite the noise, decentralized finance is not dead. The conversation centered on real-world assets (RWAs), why the space hasn’t hit that much-discussed trillion mark, and what needs to change to unlock institutional-scale adoption.

Who’s Building: A Long-Horizon Asset Manager Steps In

• Profile: Baillie Gifford, one of the UK’s largest asset managers, runs about $300 billion AUM across public and private equity, fixed income, and multi-asset strategies. The firm emphasizes active investing and a long-term horizon measured in decades, not quarters.
• Mandate: Bring crypto-native innovation in-house and help crypto teams scale products that institutions will know, use, and ultimately love — without compromising on investor protections.

“Anything we do in the crypto space has to be the ‘same but better.’”

“Same but Better” — What It Means for End Users

The design principle is straightforward: match the quality, rights, and structure of traditional products, then improve them with onchain advantages.

• Cost — and who benefits: Savings are passed through to end customers, not retained to enhance margins. Even small changes matter: a two basis point saving over 10 years compounds over a 60-year savings life.
• Utility and composability: Onchain assets can be used as collateral, integrated across portfolios, and made interoperable across products — services historically reserved for top-tier private bank clients can be democratized.
• Operational resilience: Reducing manual processes and human error shifts risk toward transparent, auditable tech risk. Better operations and lower costs should translate into improved risk-adjusted outcomes.

Direct Issuance vs. Wrapped Tokens ⚖️

Two tokenization models are emerging, each with different risk-reward profiles:

• Direct issuance (fully native): Onchain books and records serve as the legal source of truth for 24/7 ownership. No SPVs or extra counterparty layers. Institutional mandates and fiduciary duties make this model a forced fit for large pools of capital. As framed in the discussion, this is how the next “almost 700 trillion” of assets will come onchain.
• Wrapped tokens: Typically custody an offchain asset in an SPV (often in the British Virgin Islands) and issue a tokenized claim. Offers flexibility and utility that may suit retail users, but adds counterparty and structural risk and typically limits corporate action rights.

“They’re different Sharpe ratios. The right product has to meet the right risk profile.”

Why Transfer Agency Might Be the Biggest Win 🧱

Transfer agency (TA) — who owns what, when — is where onchain infrastructure quietly shines.

• Onchain TA reduces errors: One programmatic source of truth minimizes reconciliations. “Tokenization is just unitization on steroids.”
• From daily batch to 24/7: Traditional mutual/UCITS funds sync once per day for “who owns what,” sometimes within a fixed “one hour every business day” window. With onchain TA, movements aren’t constrained to this cadence.
• Beware hybrids: Many tokenized funds still use “mirror” or hybrid books, with onchain records that sync to an offchain legal ledger once a day. Trading between syncs introduces counterparty and settlement risk.

Regulatory Green Shoots 🌱

• Firsts and permissions: A UK manager described launching what was called the first fully native tokenized fund in the UK with onchain books and records as the legal source of truth. That required special permissions.
• Broader momentum: Jurisdictions are converging on digital security frameworks. A Luxembourg UCITS example (Franklin’s tokenized fund) was noted for using onchain books and records. The process is harder, but the ROI compounds through operational savings.

The Intermediary Stack: From 19 to 3 🧭

A UK study by Dr. King was cited to illustrate the current market plumbing:

• Today: ~19 intermediaries stand between “pound to product.”
• Tomorrow: That could compress to roughly three — issuer → broker-dealer → wallet — as custody, TA, and fund admin move onchain.

Who’s most at risk?

• Platform distributors: The “AJ Bells of the world,” where a 30 basis points platform fee is already under pressure, face direct-to-consumer wallet rails, onchain oracles (instead of bespoke APIs), and AI-assisted advice.
• TA re-bundles with custody: Transfer agents evolve toward KYC/AML programs, becoming part of a unified onchain servicing stack.
• Banks could win big: When incumbents actively self-disrupt, technology is disruptive — not necessarily the new company. With the right empowerment, banks and leading asset managers can be phenomenal winners.

“There are two ways of disrupting: the technology is disruptive, or your company is disruptive.”

Liquidity, Not Just Ledger: Market Structure Realities 💧

• Market makers as early winners: As “air gaps” in cash settlement compress, liquidity providers may “name their price” in the interim. Sustainable tokenized markets need continuous two-way prices, not 2% haircuts on underlying NAVs.
• Stablecoins need to graduate: The next gains come from using stablecoins across the full enterprise stack — not just cross-border, just-in-time payments. CFOs will pay a cost of carry for certainty; infrastructure that embeds stable value into banking and treasury workflows stands to benefit.

Tokenized Funds as the Gateway

• Step one: Build institutional-grade, fully native tokenized funds (onchain books and records; no SPVs) that meet compliance and fiduciary standards.
• Step two: Use that stack to participate in underlying tokenized securities. Example ambition: run a fully onchain US equity portfolio from a vault where the cost of running that fund probably drops about 60 basis points — savings that can be passed to end clients.

“Tokenized funds are a gateway drug for TradFi.”

Actionable Takeaways 📌

• Map the model to the mandate: Direct issuance for institutions; wrapped for retail convenience — different rights, different counterparty risks, different use cases.
• Prioritize onchain TA: The legal ledger needs to live onchain to unlock 24/7 operations and remove reconciliation risk. Hybrids will lag on utility.
• Shrink the stack: Expect a transition from ~19 to ~3 intermediaries over time. Identify where the value-add remains defensible.
• Underwrite liquidity: Ensure credible market making to avoid punitive 2% bid-ask dynamics that negate the benefits of tokenization.
• Leverage stablecoin infra: Look beyond payments and yield; real enterprise integration is where durable advantages accrue.

Final Word

“If TradFi and DeFi come together as finance, risk-adjusted outcomes improve for everyone — fewer manual errors, lower operational risk, and a system that runs 24/7.”