Wall Street’s biggest balance sheets are quietly rebuilding the crypto stack under the banner of tokenization and custody.
What began as a defensive stance toward digital assets is turning into an infrastructure shift: bringing fund administration, cash management, and settlement onto blockchain rails that look more like BNY Mellon’s LiquidityDirect platform than a typical crypto exchange.
Since late summer, Goldman Sachs and BNY Mellon have taken tokenized money market funds live, Citi has positioned itself as a tokenization agent and custodian on Switzerland’s SDX exchange, and BlackRock has doubled down on the thesis that tokenized funds will eventually sit beside ETFs as a core product line.
In the span of a few months, tokenized treasuries have become an $8.3 billion asset class. Broader real-world assets (RWAs) now range between $24 and $30 billion. Yet the real contest isn’t in the numbers; it’s in who will custody the next $100 billion of digital paper and how those assets connect to traditional balance sheets.
The first wave of bank entries shows a clear pattern. Goldman and BNY chose the least volatile and most systemically relevant asset they could: money market funds.
Money market funds are among the safest and most liquid investment vehicles in traditional finance. They hold short-term government and corporate debt, giving institutions a way to park cash while earning modest yields with minimal risk. Tokenizing them turns those holdings into digital units that can be transferred instantly and settled 24 hours a day.
For large institutions, the benefit is not speculative but operational: corporate treasurers can move cash faster, pledge assets as collateral, and reduce the frictions that come with banking cut-off times.
Citi’s strategy moves in parallel through private markets. By joining SDX, Citi now provides custody and tokenization services for regulated digital securities, acting as the back-end for issuers experimenting with tokenized bonds or shares.
The structure resembles traditional custody, but settlement happens atomically, meaning payment and asset transfer occur simultaneously without intermediaries.
BlackRock’s BUIDL fund demonstrates how this can scale. The fund holds tokenized Treasury bills and represents them as programmable tokens. Its assets have grown more than eightfold in 18 months. With total assets at $13.5 trillion and nearly $100 billion of crypto-linked funds, BlackRock has the reach to turn tokenized products into standard portfolio components for institutions.
The quiet competition for custody fees
If the early 2020s were about crypto custodians learning compliance, the mid-2020s are about banks learning blockchain. The players are different, but the economics are familiar. Coinbase, Fidelity, and BNY already charge custody fees of roughly 0.05% to 0.15% of the value they hold, depending on client size and risk profile.
As tokenized cash and securities become mainstream, these percentages start to resemble the fees charged in fund administration and collateral management, creating an overlap that did not exist before.
In this version of tokenization, the appeal is not headline innovation but efficiency. A tokenized Treasury or fund share can move instantly between accounts and settle in real time, cutting costs for both clients and custodians. The conservative outlook for this market sees tokenized Treasuries hovering between $6 billion and $8 billion if regulation slows and yields fall.
A middle-ground projection expects around $10-15 billion by mid-2026 as more banks integrate money-market products. The optimistic scenario reaches $25-40 billion if tokenized cash accounts tied to ETFs take off and if banks start testing repo markets for tokenized collateral.
Repos are the backbone of short-term lending in finance. Banks lend cash in exchange for safe collateral such as Treasuries, agreeing to reverse the trade later. Tokenized repos would allow these transactions to settle automatically on a blockchain, reducing the operational delays and counterparty risk that currently require expensive intermediaries.
That collateral link is what turns tokenization from a bookkeeping experiment into real financial plumbing. Goldman and BNY’s tokenized money-market shares already move within closed, permissioned environments.
The next question is whether those tokens can move across custodians safely. The joint Project Guardian initiative between the UK’s Financial Conduct Authority and Singapore’s Monetary Authority is testing that exact idea: shared standards for verifying compliance across public and private blockchains.
If the project succeeds, 2026 could bring the first bank-to-bank repo transactions executed entirely with tokenized assets.
Today’s systems still operate inside walled gardens. Networks such as Goldman’s GS DAP, SDX, and JPMorgan’s Onyx offer efficiency at the cost of interoperability. Regulators prefer this model because every participant is known and verified, but financial institutions are beginning to explore how permissioned systems might connect to public networks through cryptographic proofs that preserve compliance.
If that link is established, custody fees could expand toward $300–600 million in annual revenue, assuming tokenized cash and Treasury products reach $25–40 billion in assets and charge service fees near 0.1–0.15%.
Policy will decide who gets to hold the keys
Regulation will decide how fast this happens. In Europe, MiCA has introduced uniform rules for custodians and crypto-asset service providers, known as CASPs. These rules define how digital assets must be segregated, safeguarded, and reported, allowing banks to passport tokenized funds across the European Economic Area without facing different national requirements.
The UK and Singapore are building similar frameworks through Project Guardian to standardize tokenization in asset and wealth management.
In the US, the obstacle is accounting treatment. Under the now-revised Staff Accounting Bulletin 121, or SAB 121, banks holding crypto for clients had to record those assets on their balance sheets as liabilities. That made large-scale custody uneconomical for systemically important banks, also known as G-SIBs. If future guidance removes that burden, these banks could hold tokenized assets without incurring punitive capital requirements, unlocking the full balance-sheet potential of tokenization.
Until then, the firms already embedded in ETF custody, Coinbase, Fidelity, and BNY, retain a practical advantage. Coinbase’s $246 billion in assets under custody shows how much flow still runs through crypto-native infrastructure. Yet the gravitational pull of regulated fund structures is increasing. As tokenized Treasuries and money-market products scale, the operational logic of banking begins to merge with blockchain’s settlement mechanics.
Money-market tokens may sound like plumbing, but plumbing determines who controls the flow of funds. In this race, the flow is not just digital assets but the future structure of the balance sheet itself.
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