When the NYSE went down this week — causing several erroneous trades based on bad pricing data — Blockworks’ Empire Newsletter responded to expert calls for the integration of blockchain technology with serious skepticism: “Wall Street just implemented the ability to settle trades in one business day versus two, and now we want to tell them about firms like Chainlink, which offer decentralized oracle networks. […] We have to be pragmatic.”Sure, pragmatism is key, and Wall Street has historically been slow to embrace blockchain technology beyond speculation. But something has clearly shifted this year.In 2023, when the industry was still recovering from the FTX collapse, Chainlink’s co-founder, Sergey Nazarov, surprised many at Sibos (Swift’s annual conference) by predicting that everyone at the conference would inevitably be compelled to join the blockchain industry. Fast forward to last week’s Consensus, one of the largest crypto conferences, and you saw more suits than ever before. While many pundits both within and outside the industry are still obsessing over dog memecoins, most seem to be missing the real trend: Institutional adoption is quietly but rapidly happening before our eyes. If we want crypto to merge with traditional industries and expand tenfold, we need Wall Street and capital markets to embrace it. And asset tokenization seems to be the key. While Wall Street moves at a slower pace compared to crypto startups, the idea that it can’t embrace new technology is outdated. The innovation divisions of the largest banks and asset managers are already advancing with tokenization experiments and proofs of concept, showing they can certainly understand decentralized oracles.BlackRock, the world’s largest asset manager, seems to agree. They began their foray into crypto this January with a record-breaking bitcoin ETF, now managing around $16.5 billion. Larry Fink recently said he sees tokenization as the next big opportunity in digital assets, sending a clear signal that tokenization is not just for the crypto industry. By March, BlackRock introduced its first tokenized fund and invested in crypto startup Securitize to create a money market fund on the Ethereum blockchain. This initiative has attracted $385 million and could generate up to $88 million in annual revenue. But BlackRock isn’t alone. Asset managers including Franklin Templeton, Hamilton Lane and WisdomTree have tokenized ’40 Act funds to enhance security and transaction speed. UBS launched a tokenized money market fund on Ethereum, while JPMorgan and Citi have also ventured into tokenization projects. Other institutions, including HSBC, Societe Generale and the European Investment Bank, have issued tokenized bonds. Even major payments networks Visa and Mastercard are exploring settling tokenized assets on a shared ledger. In 2023, Chainlink partnered with Swift and major banks to connect Swift’s system with blockchains like Ethereum, thus enabling secure cross-chain messaging. It also recently collaborated with DTCC to embed structured data onchain. Two years ago, such collaborations between large financial institutions and a blockchain company were unprecedented, and now they are a reality.Read more from our opinion section: It’s time to end the SEC’s war on cryptoTwo major elements have finally aligned for institutions to embrace crypto: Capital markets finally understand the financial incentives enabled by crypto (crypto significantly boosts transaction efficiency, saving asset managers millions), and the technology is reaching the point of production-readiness needed to enable mass asset tokenization.We see proof of these trends in our daily work with the largest banks and asset managers. Over the past year alone, the Chainlink Labs team has engaged globally with dozens of institutions across the global financial industry. This isn’t 2016 or 2017, when blockchain was merely a side focus for a few oddballs in the innovation wings of massive financial firms. Today, the traditional finance and capital markets industry is not just experimenting; it is making real strategic moves to integrate blockchain technology into its tech stack.As for the NYSE glitch…imagine a system where trading halts due to technical issues are minimized, and market stability is maintained through automated checks and balances. This world is becoming a reality because the technology needed to solve these issues is here.Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.
