Asset Tokenization in Financial Markets 2025

Contents49 The main challenges associated with permissioned ledgers are scalability and adoption, although they are likely to succeed when financial institutions with strong network effects operate the platform. However, the permissioned or private construct can hinder adoption for smaller players. Permissionless ledgers Financial institutions have historically approached permissionless networks with caution due to regulatory and operational concerns. Nevertheless, a clear trend towards exploration and adoption is emerging. Permissionless networks – open systems where anyone can join, access data and validate transactions – are increasingly being tested and integrated into institutional strategies.135 At their core, permissioned and permissionless systems differ in governance and access. There are five distinct drivers for the exploration of permissionless networks: 1. Economic efficiency Deploying and operating Layer-1s is increasingly cost-effective. Avalanche’s 9000 upgrade, for instance, cut Layer-1 deployment costs by 99%.136 2. Developer ecosystems Open-source networks such as Ethereum and Solana host more than 24,000 active developers, accelerating innovation and tool development.137 3. Network effects Public ledgers promote broader participation and distribution, reducing single points of failure and aligning with user-centric financial models.138 4. Transparency and real-time settlement Open ledgers allow for continuous asset verification, streamlining operations and reducing intermediary reliance. 5. Enhanced transaction performance Innovations such as Ethereum’s Proto- Danksharding (EIP-4844) and Solana’s speed enhancements have improved transaction throughput and costs.139 As of May 2025, financial services entities are actively using at least 30 permissionless programmable ledgers.140 Their adoption is expected to grow as various market forces drive further use of programmable ledgers. Public networks such as Ethereum now average 1–1.5 million daily transactions.141 Deutsche Bank is planning a permissioned ZK-proof Layer-2 on Ethereum to meet compliance requirements, demonstrating that compliance on permissionless networks does not require platform-wide gatekeeping functionalities and this can be enabled at the application or asset level.142Notable institutional deployments include: — Franklin Templeton expanded its tokenized US Government Money Fund (FOBXX) to Avalanche, marking the first US-registered mutual fund using a public ledger for recordkeeping and transactions.143 — BlackRock launched its BUIDL fund across Ethereum and six other public networks: Aptos, Arbitrum, Avalanche, Optimism, Polygon and Solana.144 These on-chain products operate without central clearing parties, signalling a structural shift in market infrastructure. Environmental concerns have diminished. The shift from energy-intensive proof-of-work (PoW) to efficient proof-of-stake (PoS) consensus mechanisms – now the dominant model for public-permissionless – has made programmable ledgers far more sustainable and scalable than in prior cycles.145 The longstanding concern of network scalability has been put to rest.146 However, there can be challenges associated with permissionless ledgers. From a financial stability perspective, the transparency of permissionless programmable ledgers can amplify liquidity risks for banks by enabling visible transaction flows that may trigger withdrawals during stress events. Network congestion, low throughput and variable fees further delay settlements and can undermine liquidity.147 Permissionless networks also face the privacy–transparency conundrum – balancing open data access with confidentiality.148 Lacking built-in identity verification, they require external solutions to meet KYC/AML requirements, often involving off-chain data storage and compliance processes. Lastly, while programmable ledgers enable distributed governance, financial institutions must ensure that these systems align with their mandate to establish clear lines of responsibility and business continuity, such as reversals and maintenance upgrades.149Design choices