Tokenization Unlocks ’Enhanced Liquidity’ Potential, But BofA Warns Major Hurdles Remain
Wall Street's latest buzzword faces reality check as traditional finance giants grapple with blockchain adoption.
Liquidity Revolution or Empty Promise?
Tokenization promises to slice illiquid assets into tradable digital fragments—real estate, art, even intellectual property. The theory? Instant liquidity meets fractional ownership. The practice? Regulatory quagmires and legacy system integration headaches that'd make any banker reach for antacids.
BofA's analysis highlights the irony: traditional finance institutions praising decentralization while trying to control it. They want blockchain's efficiency without ceding power—typical banker mentality of wanting their cake and eating it too.
Infrastructure gaps and compliance nightmares stall progress. Meanwhile, crypto natives keep building permissionless solutions that bypass gatekeepers entirely.
The verdict? Tokenization will eventually transform finance—just probably not led by the institutions currently writing reports about it.
Tokenization risks
Still, Bank of America cautioned that tokenization faces significant hurdles before it can achieve widespread adoption.
Regulatory uncertainty remains the biggest challenge. While U.S. policymakers have signaled support, future administrations could reverse course, and many jurisdictions are still in the process of writing rules.
The bank said custody is another concern, as investors risk losing access to assets if private keys are misplaced, and institutional-grade custody solutions are still developing.
On the technology side, vulnerabilities in smart contracts or blockchain platforms leave room for exploitation, and integration with legacy financial infrastructure presents additional obstacles, given the reliance of most institutions on traditional systems.
And when it comes to publicly traded assets, existing U.S. markets already offer DEEP liquidity, low fees, and strong investor protections, making the case for tokenized versions less compelling, the report added.
