While tokenisation offers opportunities for asset managers to modernise operations and expand their market reach, there are still barriers to its mass market adoption. Carole Michel, Senior Global Product Manager for Fund Distribution, Securities Services at BNP Paribas, weighs in.
Asset managers have been trialing tokenisation via different asset classes and networks. While digital assets, thanks to blockchain technology, could influence all investment products, tokenised funds seem to emerge as a priority asset class to develop. There’s a clear “network effect” offered through blockchain technology, including quicker, more transparent and more secure transactions.
Institutional clients and investors normally appoint a custodian which provides the security to restitute assets in the case of any loss. BNP Paribas’ Carole Michel anticipates that the role of custodian could evolve, and hence, they are exploring alternatives. We might see a clear, major push from the sell-side, but growing demand from the buy-side is what we cannot ignore.
Theoretically, investors can custody their tokenised assets directly on their wallet. But what we see is that for investors, it’s very complex to be equipped with managing and safekeeping the keys.”
A “digital locker” solution
Early 2026, BNP Paribas’ Securities Services business will roll out the initial experimentation phase of a “digital locker” solution, which Carole Michel explains would serve to manage the investors wallets with a simplified one-stop-shop when handling and routing orders to the Transfer Agents across multiple blockchain networks.
The aim is also to secure safekeeping of keys for these investors, so they don’t need to manage and interact directly with any blockchain network, for instance.
From experimentation to scalable advanced experimentations
Issuing as Transfer Agent in tokenised form is one of the many efforts BNP Paribas has made in the digital asset space. Its strategic partnership with Allfunds Blockchain, for example, focuses on digital innovation, including tokenisation. Through this partnership, there have been two successful live trials which involved the digital representation of existing fund shares that had first been issued traditionally. Also, further trials with native tokenised funds directly issued onto it have proven to be efficient. In particular, in terms of the instantaneous order execution based on the net asset value receipt, it can improve the current transfer agent batch driven value chain. This last step with native tokens showed that potentially in the future the shares of a single fund could be issued and owned on multiple blockchains, on the network where the investors host its wallet.
BNP Paribas’ Securities Services business has also tested the creation of secondary market trading for fund tokens with an asset manager client via a pilot project in a sandbox in Spain. This move allowed the banking and financial services company to test technology for enhancing fund liquidity, as the project allowed for 24/7 settlement and instant trade.
Full benefits not yet unlocked
But Carole acknowledged that while there are clear potential benefits of tokenisation, the industry might need more time for its full adoption.
Currently, asset managers face complexity and additional running costs because they’re operating such a dual model. As they are accommodating both traditional and digital assets in parallel, it might slow down the overall benefits of distributed ledger technology (DLT). Carole highlighted that Asset Managers will need additional support along the value chain, including custodian depositary, or distributor to get frictionless processes like reconciliation. Transfer agents will also need to evolve, from maintaining a fund register in a single traditional eco-system to maintaining the fund register across multiple ecosystems including private and public blockchains for Asset Managers.
However, by distributing funds digitally, Carole also believes asset managers will be able to tap into new segments and types of investors. “Today there’s a strong trend that digital users are starting to invest in such products,” Carole says. “There’s a huge potential with this new type of investors, and we see that they’re looking mainly for digital assets and using exchange platforms.
Additionally, progress might be hampered by the lack of more widely available and reliable forms of digital cash. The market is waiting for a full-scale wholesale CBDC to materialise and in the meantime, it is embracing alternatives like stablecoins. That could be the next step: Atomic security tokens delivered versus cash tokens wis expected to remove counterparty-risk also shorter the settlement cycle with instantaneous settlement on chain.
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