Tokenization Promises ’Enhanced Liquidity’ But Faces Major Hurdles, BofA Analysis Reveals
Wall Street's latest obsession hits regulatory walls as traditional finance clashes with blockchain potential.
Liquidity Mirage or Revolution?
Bank of America's latest research confirms what crypto natives knew for years—tokenization unlocks liquidity pools traditional finance can't touch. Yet the very institutions pushing this innovation face their own legacy systems and regulatory paralysis.
The $530M question isn't about technology—it's about whether traditional finance can move faster than regulatory scrutiny. StablecoinX's massive treasury backing shows institutional money is betting on yes.
While bankers debate compliance frameworks, the unbanked continue adopting digital assets without permission. The ultimate irony? Blockchain serves both ends of the financial spectrum while the middle remains stuck in committee meetings.
Maybe that's why volume surges when traditional finance hesitates—decentralization doesn't wait for board approval.
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.
