Tokenisation Is About Settlement, Not Liquidity, And Banks Must Choose A Path, Says New Report

(MENAFN- Khaleej Times) Tokenisation is about settlement, not liquidity, and banks cannot afford to stay out of it in the long term, according to Arjun Vir Singh, global head of fintech and digital assets at consultancy Arthur D. Little.

“You cannot create liquidity by tokenising something. It is around settlement,” Singh told Khaleej Times in an interview on ADL's new report on how commercial banks should approach tokenisation.

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He was speaking on the sidelines of the Banking Innovation and Technology 2026 (BIT'26) conference held in Dubai on Tuesday. The conference was organised by Khaleej Times.

“Finance will increasingly move on-chain, and tokenisation will be one of the key factors that reshape financial services. "I don't think the choice for banks is whether to play or not. It is which path they want: originating, wrapping or partnering. Staying out may be an option in the short term, but in the long term it is not,” he said.

Wrapping or originating

The report, Bank Tokenization: Choosing Between Wrapping & Originating, focuses on the choice banks face between wrapping existing assets and originating new on-chain products. Singh said many people still do not fully understand the difference between tokenisation and fractionalisation, which the report seeks to clarify.

For commercial banks, he said, there are four positions: originate, wrap, partner or stay out. Originating requires deep capability, client demand for on-demand execution and regulatory support. "For most banks, wrapping will be the natural entry point, and a considered choice," he said.

Singh said the report's timing was significant because“Wall Street's plumbing is going on-chain”.

The Depository Trust & Clearing Corporation (DTCC), which holds more than $100 trillion of securities in custody through the DTC, is expected to launch its tokenised services, using what it calls a“digital twin” model.

Where demand will emerge first

Singh said tokenisation is likely to gather interest in the near term where buyers already exist and the market is mature, such as tokenised money market funds and commodities.

On Dubai, Singh said the emirate“has definitely got the foundations right”: ownership is recorded against the official title deed with no company in between, assets are priced and paid for in dirhams, and a regulated venue is being rolled out in careful phases.

“But tokens alone don't create more buyers,” he said.“They don't set market prices, and there are no easy ways out when you need it.”

The report said the debate over what tokenisation is for has been settled in favour of settlement efficiency rather than liquidity.

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