The Digital Asset Primer: On-Chain Tokenization for Payments Professionals

The convenience, security and speed of digital innovation have reshaped the way businesses and individuals transact.

Now, money and assets are undergoing their own fundamental transformation.

It’s all happening by way of tokenization on the blockchain. On-chain tokenization is moving from concept to practice, with players like Visa, Mastercard, J.P. Morgan and other commercial banks exploring or piloting real-world tokenized payment and financial systems.

For chief financial officers and corporate treasurers, tokenization isn’t just a tech issue; it could represent a capital strategy shift.

As recently as Friday (April 18), Vera Capital announced a partnership with Blocksquare to tokenize “a substantial portfolio of commercial and multifamily real estate assets” across the United States, having already tokenized a $5.4 million commercial property in Fort Lauderdale.

BlackRock CEO Larry Fink also wants all assets to be tokenized on a blockchain and tradable online, writing in his shareholder letter: “Every stock, every bond, every fund — every asset — can be tokenized.”

At its most fundamental level, tokenization refers to representing real-world assets, such as fiat currency, deposits, securities and investment contracts, as digital tokens on a distributed ledger. These tokens can then be transferred, programmed or settled in ways traditional systems don’t allow.

Tokenization isn’t a cryptocurrency play. Tokenization helps give businesses and financial services stakeholders a way to move value faster, cheaper and more securely across different networks. It’s about modernizing the movement of money and assets while democratizing investment access to institutional-grade products.

See also: Stablecoin Sandwiches? Here’s What CFOs Need to Know About Crypto Jargon

What Is on-Chain Tokenization?

Unlike traditional digital assets, which are typically ledger entries in a private system (like a bank or card network), on-chain tokens are blockchain-native. They can be programmed, split, audited or transferred with a few lines of code, and often faster than traditional methods allow.

These tokenized real-world assets (RWAs) can be anything: fiat currency (like dollars or euros), real estate, equities, loyalty points or invoices.

Payments giants aren’t waiting on regulators to get started prototyping. Last year, Visa tested the settlement of stablecoins. J.P. Morgan’s JPM Coin is now facilitating billions of dollars in daily transactions, primarily for institutional clients.

“Banks are in the state where they are thinking about blockchains as public infrastructure that they need to rely on,” Chainalysis co-founder and CEO Jonathan Levin told PYMNTS this month.

“When we started the business in 2014 … cryptocurrency only meant blockchains that had native cryptocurrency tokens,” he said. “Today, people are putting all types of financial instruments on the blockchain.”

As appetite grows from corporate treasurers for 24/7 programmable money, tokenization could provide tangible benefits to companies managing global supply chains, complex vendor networks or digital platforms. While tokenized payments are not a panacea, they can help to solve specific, persistent pain points in the global movement of money.

Read also: 3 Things Payment Stakeholders Can All Agree on About Stablecoins

The Relevance for Payment Leaders

Cross-border payments, treasury management and programmable contracts are among the emerging real-world use cases for on-chain RWA.

Traditional correspondent banking networks are fragmented and slow. Tokenized fiat or deposits on a shared ledger allow for near-instant cross-border transfers, potentially collapsing multiday settlement windows into minutes or seconds. This is among the main benefits of stablecoins, an increasingly popular payment mechanism that involves the tokenization of fiat and other reserve backings.

At the same time, multinational corporations can struggle with liquidity fragmentation across jurisdictions. Tokenized deposits can be moved 24/7 across entities or regions, enabling just-in-time funding and optimizing working capital.

Blockchain-based smart contracts can also allow conditional or milestone-based payments to execute automatically, which could prove useful for trade finance, supply chains or royalty payments. Ultimately, tokenization’s benefits such as real-time liquidity, conditional payments and borderless value exchange can create competitive advantages.

Two primary roadblocks to scalable utility across the enterprise are regulatory fragmentation and digital identity.

Regulatory alignment remains patchy, especially across borders. Cybersecurity and smart contract auditing are still evolving. And adoption depends not just on technology, but on user trust and industry coordination.

Sensitive financial data and transactions may be increasingly exposed to public scrutiny on-chain, so there’s a pressing need to address privacy and identity challenges within crypto.

However, the marketplace isn’t standing still, and work is being done to overcome these challenges. For forward-thinking finance leaders, it could be worth entertaining that the next decade of payments may be built not just with APIs and rails, but with tokens, smart contracts and interoperable ledgers.

For all PYMNTS digital transformation and B2B coverage, subscribe to the daily Digital Transformation and B2B Newsletters.