A regular guest writer and prominent figure in wealth management thought leadership and development writes about one of the most talked-about themes in global finance – tokenization.

The following article comes from Abbas Hashmi (pictured below), ABFP, who is program leader at Columbia Business School’s Family Enterprises and Wealth program. He is also a regular contributor to Family Wealth Report (see previous examples of his writing here and here). 

His article examines the trend of tokenization, how it intersects with private markets and the supposed process of “democratization” in private markets that has been talked about often. The editors are pleased to share these ideas; the customary editorial disclaimers apply to views of guest writers. To comment and get involved in conversations, email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com.

Abbas Hashmi

Tokenization has become one of the most discussed themes in global finance. Banks, asset managers, exchanges, and technology firms are increasingly exploring how blockchain infrastructure could reshape settlement systems, collateral management, private markets, and cross-border capital flows. The discussion has moved far beyond crypto-native circles and now sits within institutional conversations involving sovereign wealth funds, pension plans, family offices, and large financial institutions.

Much of the public narrative around tokenization focuses on democratization. Fractional ownership, lower investment minimums, and digital distribution are often presented as mechanisms that could expand access to private credit, infrastructure, venture capital, and real estate. The assumption is that tokenization will make private markets more accessible and, over time, more liquid.

Institutional investors tend to frame the issue differently.

A tokenized asset may become easier to transfer, but transferability does not automatically create liquidity. The underlying characteristics of private markets remain largely unchanged regardless of the technology used to record ownership or process transactions. A tokenized office building still depends on occupancy levels, financing costs, tenant quality, and local economic conditions. A tokenized private credit strategy still depends on underwriting standards, covenant structures, borrower performance, and recovery outcomes. Venture capital investments still depend on governance, future funding rounds, exit conditions, and access to capital markets.

Technology can improve operational efficiency without changing the underlying economic nature of the asset itself.

This distinction helps explain why institutional adoption has moved more slowly than public enthusiasm. Large institutions continue to focus on legal certainty, collateral quality, operational resilience, liquidity access, bankruptcy treatment, and governance standards before allocating meaningful capital into tokenized structures. Traditional financial infrastructure evolved over decades around custody systems, clearing mechanisms, transfer restrictions, creditor protections, and enforceable ownership rights. Blockchain infrastructure may modernize parts of those rails, but institutional investors still require the same degree of trust, enforceability, and operational reliability that developed within traditional financial systems.

Many tokenization structures today still resemble digitally wrapped claims on assets rather than direct legally perfected ownership itself. That distinction becomes important during periods of stress, where questions surrounding custody, counterparty exposure, liquidity pathways, and bankruptcy treatment can quickly move from theoretical concerns to material risks.

Private markets create an additional layer of complexity because they remain relationship driven, operationally intensive, and inherently long duration in nature. Tokenization may simplify administration and improve transfer processes, but it does not create continuous market depth for assets that fundamentally trade infrequently.

The psychological perception of liquidity may therefore change faster than liquidity itself.

Digital accessibility can encourage investors to assume an asset can always be sold efficiently because it appears tradable on a platform or exchange. Secondary market demand, however, may remain limited during periods of volatility, particularly for private assets where valuation transparency and buyer depth are already constrained. Investors who associate tokenization with continuous liquidity may underestimate how quickly liquidity conditions can deteriorate in stressed environments.

Family offices and long term investors should pay close attention to this dynamic. Many families built wealth through concentrated operating businesses, private real estate holdings, and patient ownership structures. Their governance systems were designed around stewardship, multigenerational planning, and controlled liquidity expectations. Tokenization introduces a market structure where long duration assets may increasingly be viewed through a shorter-term trading lens, particularly by younger investors accustomed to digitally native financial systems.

The infrastructure opportunity remains significant despite these concerns.

Large institutions are already exploring tokenized collateral systems, programmable settlement mechanisms, treasury management applications, and operational automation. Those use cases create measurable economic incentives because they improve capital efficiency and reduce friction within financial infrastructure. Faster settlement cycles can reduce capital constraints. Collateral movement across jurisdictions and time zones can become more efficient. Administrative functions that currently require multiple intermediaries may eventually become programmable through shared digital infrastructure.

The largest impact of tokenization may therefore emerge inside institutional market infrastructure rather than retail speculation.

Private markets continue to grow faster than public markets across many asset classes, creating pressure on firms to modernize subscription processes, reporting systems, transfers, settlement operations, and investor administration. Blockchain infrastructure may help improve efficiency across many of those functions over time.

Institutional adoption, however, will continue to depend on governance standards, legal clarity, operational safeguards, qualified custody, and reliable liquidity pathways. Financial systems evolve slowly because trust compounds slowly. Markets consistently reward systems that improve efficiency while preserving confidence, enforceability, and operational resilience.

The underlying principles of finance have not changed. Capital still moves toward structures that protect ownership rights, maintain access to liquidity, and reduce uncertainty during periods of stress. Blockchain infrastructure may reshape the rails beneath the system, but the requirements supporting institutional trust remain largely the same.

Selected references and market discussions informing this article:

https://www.bloomberg.com/news/articles/2024-08-22/treasuries-go-24-7-as-repo-trade-hits-blockchain-on-a-saturday

https://www.dtcc.com/digital-assets

https://www.iosco.org/policy_recommendations_for_crypto_and_digital_asset_markets.htm

https://www.digitalasset.com/canton-network

https://www.tradeweb.com/our-markets/digital-markets/

https://www.spglobal.com/ratings/en/research-insights/topics/digital-finance-and-tokenization

https://polychain.capital

About the author

Abbas Hashmi is the principal of Saudi Family Holdings, a single-family office based in New York and Riyadh. He previously held leadership roles at Goldman Sachs and AIG and serves as program leader at Columbia Business School’s Global Family Enterprise Program. Abbas is an honorary co-chair of United States Trade Missions to Saudi Arabia, the United Arab Emirates, and Bahrain, where he advises on cross-border capital strategy and private market access. He also served on the advisory board of the Silverstein Dream Foundation, part of Silverstein Properties, a global real estate and venture platform with multi-billion-dollar assets under management and a legacy that includes the development of the World Trade Center. As a frequent keynote speaker, Abbas appears at global investment summits to speak on family office capital, co-creation models, and emerging market strategies.