The Tipping Point for Tokenization and the Road to Mass Adoption

Disclaimer: All of these are my personal views and not the views of my employer. The content contained in this post does not constitute financial or investment advice whatsoever and is for informational purposes only.

The blockchain industry has long hypothesized about when and how mass adoption for the technology–especially tokenization–will emerge. Various banks and consulting firms–from Citito BCG–have published reports predicting trillions in assets will be tokenized over the coming years. At the same time, many instances of tokenized asset issuance to-date have targeted crypto-native capital and end customers. And while there is a growing number of users, liquidity, and TVL across various blockchain ecosystems, we believe that mass adoption may not necessarily stem from this cohort of individuals and companies who actively “participate on-chain” today. Mass adoption won’t come from users engaged in speculative memecoin trading or from enterprise blockchain experiments leveraging isolated DLT infrastructure. Instead, it will occur through seamless integration with financial infrastructure—namely, through many of the same channels that already serve billions of retail and institutional end users and collectively facilitate trillions of dollars in daily transactions today.

Financial advisor platforms and RIAs, retail brokerages, exchanges, neobanks, fintechs, mobile payments, and other related platforms are the pipelines that will drive tokenization into the mainstream–without their end users caring or even realizing they are using blockchain to access new and better products, services, and capabilities. These institutions–whether embedded incumbents or tech-forward challengers–already provide the trust, liquidity, and accessibility needed for widespread adoption, maintaining that users can seamlessly engage with the underlying technology stack.

Over the last several years, financial services firms of various types have been expanding their digital asset teams, while ramping up their tokenization efforts. Looking ahead, these firms will look to increasingly embed tokenized assets into their product and service offerings to drive competitive advantages at first and then ultimately to keep pace with servicing clients at internet scale.

Regulatory Clarity in the U.S. Will Unlock Further Adoption
The widespread adoption of tokenized assets will require clear regulatory frameworks that give institutions confidence in dedicating resources to these efforts. While uncertainty has historically slowed institutional adoption, meaningful progress is being made:

• SAB 121 Rescinded – The rescinding of SAB 121 simplifies accounting for digital assets, making it easier and more economically feasible for banks to offer crypto (and tokenized asset) custody services.
• Bipartisan Stablecoin Legislation – Bills like the GENIUS Act and STABLE Act propose a banking-like regulatory framework for stablecoins, requiring full asset backing and federal oversight for issuers managing over $10B in assets.
• White House Executive Order – The directive supports U.S. leadership in digital financial technology by promoting public blockchains, stablecoins, and fair banking access while modernizing outdated digital asset regulations.

Clearer compliance frameworks will accelerate adoption among institutions, paving the way for tokenized assets to be increasingly integrated into financial services. This will enable everyday users–both institutional and retail–to interact with tokenized assets without needing technical expertise or direct on-chain exposure.

Tokenized Assets Are Already Gaining Traction Through Existing Distribution Channels
The next billion blockchain users will not be drawn in by speculative memecoins or trading. Instead, users will engage with tokenized assets through financial institutions, fintechs, embedded finance offerings, and other essential services they trust.

Notably, the B2B2C model allows blockchain solutions to be seamlessly integrated into the backend infrastructure of customer-facing platforms, making the path to adoption more frictionless than it has historically been. We are already seeing examples of this today:

1. Neobanks & Embedded Finance: Digital banks and fintech platforms are employing blockchain to enhance their suite of financial service offerings through stablecoin-backed savings accounts and allowing users to earn yield without managing private keys or navigating Web3 difficulties. For example, Colombian neobank Littio utilizes https://www.avax.network/blog/colombian-neobank-littio-opentrade-interest-bearing-usd-accounts-avalanche OpenTrade’s on-chain solution to provide interest-bearing USD and EUR-based accounts, improving financial accessibility and mobility in Latin America. In another instance, Dinari is enabling retail investors globally to gain access to stocks through neobanks, wealth managers, and WealthTech applications.

2. Payment Infrastructure: Payment processors are embedding tokenized products into their services. For example, Visa and Mastercardare leveraging their existing networks to integrate blockchain-based payment and settlement solutions, while Stripe recently acquired Bridge, which focuses on making it easier for businesses to accept stablecoin payments without having to directly interact with them. Elsewhere, Santiago Roel Santos’ Inversion Capital is embedding blockchain into mainstream financial flows by acquiring traditional businesses with strong distribution networks and transitioning their operational infrastructure onto blockchain rails.

3. Credit Market Workflows: Asset managers and lending institutions are using blockchain-enabled solutions to make them more competitive and allow them to enter new markets. For example, BBVA recently used Fence’s end-to-end debt administration platform to offer the most attractive financing option to fintech firm Payflow. Fence automates operations for lenders and originators alike, while providing real-time risk monitoring and, thanks to smart contracts, instant drawdowns and waterfall payments.

Ultimately, these financial institutions are not merely experimenting with blockchain and tokenized assets, but are starting to embed them directly into their core financial and operational flows. These examples mark a growing fundamental shift in the way capital markets and the broader financial system can operate.

The Institutions Are Here
In the blockchain industry, people often say "the institutions are coming," referring to traditional finance (TradFi) and regulators becoming more engaged with the space. This increased participation from major banks, investment firms, regulatory bodies, and other established organizations suggests they have started recognizing blockchain as worth integrating into their operations and a path to expand their strategic imperatives. At this point, we would say the institutions, in fact, are already “here”, and the journey to mass adoption is well underway.

About the Author
Article authored by Morgan Krupetsky, Senior Director of BD for Institutions & Capital Markets at Ava Labs.