Tokenisation’s biggest myth: why putting an asset on blockchain does not create liquidity - tokenisation is often promoted as the solution to illiquid markets, promising to unlock trillions of dollars trapped in real estate, private credit and alternative assets. Yet a growing number of industry leaders argue that blockchain cannot create liquidity where demand does not already exist. This article explores why investor participation, market structure, regulation and trust remain the true drivers of liquidity. Tokenisation may transform how assets move, but it cannot magically create buyers, sellers or active markets.

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The great on-chain AI illusion: if the intelligence runs off-chain, what exactly is on-chain? - as interest in “on-chain AI” accelerates, a critical misconception is emerging. Most AI models do not run on blockchains at all. Instead, blockchains act as settlement, co-ordination and verification layers whilst the intelligence itself operates on external infrastructure. This article examines what genuinely happens on-chain, why AI computation remains off-chain and how trusted execution environments, zero-knowledge proofs and AI agents are reshaping digital trust. The key question is no longer whether AI is decentralised, but whether its outputs can be trusted.

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Programmable money: the coming battle between financial efficiency and human freedom - programmable money promises faster payments, automated compliance and more efficient economic policy, but it also raises profound questions about privacy, autonomy and control. As central banks explore CBDCs and digital currencies with embedded rules, money could evolve from a passive store of value into software capable of enforcing conditions, restrictions and behavioural incentives. The debate is no longer simply technological - it is about who controls the rules governing money and how much freedom individuals retain in a programmable economy.

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Agentic dollars and the new currency war: can central banks compete with programmable money? - the rise of agentic dollars marks a new phase in the evolution of money, where stablecoins, artificial intelligence and programmable finance begin challenging the traditional power of central banks. As AI agents increasingly transact in digital dollars, then monetary sovereignty, policy effectiveness and national economic independence may come under pressure. This article examines how programmable money could reshape global finance, expand the reach of the US dollar and trigger a new currency war fought through software, networks and financial infrastructure rather than banks alone.

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US $ remains dominate in global trade

Source: X

The digital expansion of dollar power

The US dollar already dominates global trade, reserves and international finance. According to SWIFT, the dollar remains the leading currency used in international payments. Stablecoins are extending that dominance into digital networks - issuers such as Circle Internet Group and Tether Holdings have effectively created privately issued digital representations of the dollar that can move globally without relying on traditional banking rails. According to CoinMetrics State of Stablecoins Research and the Block Stablecoin Dashboard, stablecoin transaction activity has expanded dramatically over recent years, with adoption increasingly extending beyond crypto trading into payments, remittances and treasury operations. The next phase may be even more significant; artificial intelligence agents are beginning to interact with financial systems directly. As autonomous software gains the ability to negotiate contracts, purchase services and allocate capital, it requires a native payment mechanism. Stablecoins are emerging as a leading candidate.

The monetary sovereignty question

If AI agents increasingly transact in digital dollars, what happens to national currencies? This question is becoming increasingly relevant for policymakers worldwide, and the concern is not simply currency substitution. It is the emergence of a parallel financial system whose operating logic may sit outside domestic monetary frameworks. The ECB has expressed concerns that foreign stablecoins could increase dependence on non-European payment infrastructure and reduce monetary autonomy. ECB Digital Euro Project Similar discussions are occurring across Asia, Latin America and the Middle East. Governments face a difficult reality. Businesses and consumers often adopt technologies based on efficiency rather than national policy objectives. If digital dollars become faster, cheaper and easier to integrate into software-driven commerce, adoption may occur because of economics rather than ideology.

The rise of programmable finance

The deeper shift is that money is becoming software. Traditional money was largely passive - programmable money can carry instructions, automate compliance, trigger payments and interact directly with smart contracts. This creates entirely new economic possibilities. Supply chains can settle automatically, insurance claims can execute without manual intervention, machine-to-machine commerce becomes possible and AI agents can manage treasury functions continuously. The result is a financial system increasingly designed for software rather than humans.

Geopolitical vulnerabilities

The lack of visibility also creates stark geopolitical vulnerabilities. Historically, the US has enjoyed what economist, Barry Eichengreen, famously termed an “exorbitant privilege ” leveraging the US dollar’s status as the global reserve currency to project asymmetric financial power and run structural deficits funded by global capital. Agentic USD represents the digital mutation of this privilege. By embedding the US dollar as the native, friction-free settlement layer for autonomous global AI agents, the US is poised to expand its economic hegemony deeper into foreign domestic economies. For non-US nations such as the UK, operating in the dark means they are susceptible to this digital exorbitant privilege. For non-US nations, operating in the dark means they are susceptible to financial leverage without understanding the mechanisms or extent of its application. This reinforces the trajectory toward economic vassalage, where national economic decisions are increasingly subordinated to external influences.

How central banks may respond

Central banks are unlikely to remain passive observers. Several potential responses are already emerging. First, regulators are developing frameworks for stablecoins. The UK, EU, Singapore and Hong Kong have all introduced or proposed rules aimed at integrating digital assets into regulated financial systems. Second, many jurisdictions are exploring tokenised forms of commercial bank money and wholesale settlement assets. Projects involving institutions such as JPMorgan Chase, Citigroup, Mastercard and Swift are testing how tokenised deposits, and programmable settlement infrastructure could operate within regulated environments such as the proposed Regulated Settlement Network Project in the USA or the Regulated Liability Network being worked on the UK. Third, central banks may eventually need digital currencies or tokenised settlement systems that are compatible with autonomous software and AI-driven commerce. The strategic challenge is clear - if AI agents naturally prefer programmable dollars, countries may need equally programmable domestic alternatives. To counter the erosion of visibility, central banks and government treasuries must surely develop and implement a new generation of strategic monitoring frameworks to track and trace digital money flows. These frameworks must move beyond traditional financial surveillance to embrace the unique characteristics of blockchain technology and decentralised finance.

On-chain analytics and blockchain forensics

The core of any strategic monitoring framework for agentic USD must be robust on-chain analytics capabilities. This involves:

· transaction graph analysis - mapping the flow of agentic USD in and out of its jurisdiction, identifying clusters of activity and understanding the relationships between different entities (e.g., distributed exchanges (DEXs), DeFi protocols, corporate digital wallets, individual users).

· entity resolution - whilst blockchain addresses are pseudonymous, advanced techniques can link addresses to real-world entities. This includes leveraging public data, exchange KYC information (where accessible) and heuristic analysis, to identify key players in the agentic USD ecosystem relevant to the domestic economy.

· pattern recognition - identifying unusual transaction patterns, large-value transfers or rapid shifts in holdings that could signal illicit activity, capital flight or significant changes in economic behaviour. AI and machine learning algorithms will be crucial for detecting these anomalies in vast datasets.

· smart contract analysis - understanding the logic and functionality of smart contracts that interact with agentic USD. This includes identifying automated payment flows, collateralisation mechanisms and other programmable financial activities.

Network mapping and ecosystem intelligence

Beyond raw transaction data, strategic monitoring requires a comprehensive understanding of the agentic USD ecosystem:

· infrastructure mapping - identifying the blockchain networks on which agentic USD operates (e.g., Ethereum, Solana, Tron), the bridges used for cross-chain transfers and the key infrastructure providers (e.g., node operators, wallet services).

· intermediary identification - pinpointing the regulated and unregulated intermediaries that facilitate agentic USD usage, such as centralised exchanges, decentralised exchanges (DEXs), lending platforms and payment gateways. Understanding their operational models and regulatory compliance is essential.

· AI agent activity monitoring - developing specialised tools to detect and analyse the activity of autonomous AI agents using agentic USD. This could involve identifying specific wallet patterns, transaction frequencies or interactions with smart contracts that are characteristic of AI-driven operations.

The real battle ahead

The future conflict may not be between stablecoins and central bank digital currencies. It may be between competing monetary operating systems. Who defines the standards? Who controls settlement infrastructure? Who governs identity, compliance and interoperability? Who determines the rules that autonomous economic agents follow? These questions increasingly matter more than the physical form of money itself. For decades, monetary power was linked to currency issuance. In the coming decade, monetary power may increasingly belong to those who control the networks, protocols and software through which money moves. The first currency war was fought through trade, reserves and capital markets. The next one may be fought through APIs, stablecoins, AI agents and programmable financial infrastructure. And unlike previous monetary transitions, it is already underway.

The unavoidable path to informed governance

The rise of agentic USD and the ensuing dollarisation represent a fundamental challenge to the traditional governance capabilities of central banks and government treasuries. The decentralisation and opacity inherent in blockchain-based financial systems threaten to blind national authorities, rendering traditional policy tools ineffective and paving the way for economic vassalage. Strategic monitoring - leveraging advanced on-chain analytics, network mapping and AI-driven insights - is the unavoidable path to informed governance in this new era. By meticulously tracking where, by whom and for what purposes agentic USD is being deployed, nations can reclaim a critical degree of visibility. This renewed insight is not a panacea but a foundational prerequisite for developing effective policy responses, mitigating financial risks, preserving fiscal autonomy and ultimately safeguarding national economic sovereignty.

Blockchain was the atomic bomb. Agentic USD, fused with AI, is the fusion bomb. It does not simply increase the destructive potential - it erases the very concept of economic locality. Capital arrives, reallocates and departs before policymakers can register the impact. The critical question for central banks is no longer whether they can control the supply of money but whether their traditional tools (especially interest rates) retain any meaningful traction when machines, not humans, are making the allocation decisions in real time.

In Article 3 of The agentic US dollar, we will look at how autonomous AI agents could become the next drivers of global dollarisation - favouring yield-bearing digital dollars for payments, trade and investment, and potentially weakening central bank control.

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CEO of the world’s biggest asset manager, Larry Fink

Source: X

The value of tokenisation is highest in markets that have liquidity and demand. In these sectors the problem is not having buyers or sellers, but it is the inefficiencies existing in legacy financial infrastructure. The settlement process is delayed, too complex, plus access to markets is limited whereby causing friction and impeding capital flows. By streamlining these processes, tokenisation enhances efficiency and accessibility without creating new liquidity. A good example of where tokenisation brings value are government bonds, publicly traded stocks, ETFs and institutional investment products. They already have a strong liquid and active market but they still use the old system of infrastructure which slows down the capital movement. Many cross-border transactions are inefficient, and settlement delays and complicated reconciliation increase costs and lower efficiency. Tokenisation is used to resolve these functional issues. Digital tokens simplify the transfer of assets, enhance record-keeping and cut administrative load. In addition, the technology enables a fractional ownership model, thereby increasing investors’ access. This finally enables assets to flow more smoothly within financial networks whilst maintaining the demand for liquidity. This is important to note because, whilst tokenisation enhances market infrastructure, liquidity ultimately relies on investor demand and continued participation in the market.

Liquidity and demand are still the key issues to the tokenisation debate. Liquidity is created when people are constantly buying and selling in the market, producing a depth of market for efficient transactions. Technology enables transactions and plays a crucial role in securing market access but cannot force investors to exchange assets in which there is no demand. Francesco Ranieri Fabracci, from Tether, reinforced this during the Paris Blockchain Week panel when he said: “It’s not that if you put an asset on-chain, it will be liquid. It doesn’t work like that at all.” He further explained that bonds, stablecoins and money market funds have a greater chance of maintaining liquidity because they already attract broad investor interest. This is also true in real estate and with private credit. In the past, such assets have had lower trading volume than public securities. Whilst tokenisation makes the process of transferring ownership and accessibility easier, it does not change the dynamics of the markets that prevent market participation. In essence, liquidity is determined by demand and not technology. Thus, blockchain infrastructure can complement existing assets that are attracting investors, and tokens with low demand may still be facing difficulties even after tokenisation.

The liquidity development of tokens on the RWA market is also proof that the demand is the main pollinator of supply and is the real driver of liquidity. RWA.xyz reports the total value of tokenised RWAs increased from about $8.8 billion in April 2025 to nearly $29.9 billion in April 2026. Whilst there is growth in a few categories, much growth is attributed to standardised assets which already have strong demand from investors and existing market activity. Other segments also had significant growth; alongside the growth in asset-backed credit, the significant growth in corporate credit recorded was due to the trend of credit issuance in the RWA market. Meanwhile, tokenised real estate and private equity show a strong percentage growth with the number of tokens rising from approximately $35 million to $296 million and from about $60M to $223M respectively. Yet, despite this growth, these categories remain relatively small compared with Tokenised US Treasury Products. This indicates that a rise in the number of outstanding shares does not always lead to a rise in liquidity, as the market capitalisation can rise from new shares issued even if trading on the secondary market is minimal. The largest categories of tokens are US Treasuries, commodities and money market instruments throughout the period. These assets are already liquid, already have a well-established investor base and have been already traded in the traditional markets. Hence, whilst tokenisation offers increased accessibility, efficiency in settlement and distribution remain the main drivers of market activity. The RWA space is growing and seems to be best suited for assets that draw in capital and participation. Strong markets create liquidity and tokenisation simply improves how that liquidity is accessed, transferred and utilised.

Why tokenisation does not make illiquid assets liquid

The programs under tokenisation focus on assets that have been traditionally illiquid. These include real estate, private credit, private equity and collectibles. Whilst tokenisation simplifies access and makes it more fluid, it does not necessarily address the drivers behind market participation. A property used for commercial purposes can be split into thousands of digital tokens - for example, making it easier to share that property. But liquidity is determined by the willingness to purchase and sell those tokens by investors; with little demand, secondary market activity will likely be limited, regardless of the efficiency of transfer of ownership. For niche assets, it is the same deal. Specialised investments, private ownership interests and rare collectibles have limited audiences. More access can lead to more reach, but not necessarily more participation. Despite the advancements in technology and increased accessibility to on-chain tools, tokenisation still struggles with market-based structural challenges. Price discovery marks one of the constraints. Valuation becomes very difficult if trading is limited, as there are fewer transactions to compare prices. Thin markets also lead to volatility, as relatively small trades can cause significant fluctuations in token prices. Therefore, tokenisation improves the efficiency of ownership transfers, but it does not necessarily lead to accurate pricing or to greater liquidity.

Regulatory challenges complicate market development as well. So tokenisation can facilitate issuance and transfer, but the actual assets remain subject to the legal rules of each jurisdiction. These rules govern who is allowed to purchase, own and trade certain instruments which, in turn, can directly impact on market participation. However, even though the infrastructure supports trade, lack of clarity or inconsistent regulation make it difficult for the secondary market to thrive. Liquidity fragmentation yet another inefficiency. Because tokenised assets are typically traded across multiple blockchains, exchanges and custodial platforms, the trading activity is fragmented across different venues. Rather than centralised pools of liquidity, activity becomes fragmented with markets getting thinner, price slippage increasing and more inefficient market execution. This fragmentation limits the extent to which tokenisation can replicate the liquidity characteristics of traditional centralised financial markets. Liquidity also relies on trust and adoption. Investors have to trust the token issuer, the trading platform and the enforceability of ownership rights. This is especially relevant for institutional investors who need clear regulations and a well-developed market infrastructure prior to investing. Even if designed to perfection, the tokenised markets may find it hard to attract continuous participation without this layer of trust. Ultimately, the discussion about why tokenisation cannot magically fix illiquid assets centres on market structure. With the introduction of blockchain technology, settlement, transparency and the transfer of ownership are enhanced. However, demand, legal clarity, market makers and trading activity remains the foundation for sustainable liquidity. Without these foundations, tokenisation can enhance efficiency but cannot convert illiquid assets to liquid.

The tokenisation industry may be asking the wrong question. The challenge is not how to put more assets on-chain, but how to create deeper, more active markets around them. Blockchain can make ownership transferable in seconds but it cannot manufacture demand, trust or price discovery. The greatest commercial opportunities may therefore lie not in tokenising illiquid assets but in building the infrastructure that attracts liquidity: regulated marketplaces, market makers, digital identity, custody, compliance and distribution networks. The winners of the next phase of tokenisation may not be those issuing the most tokens but those creating the ecosystems where capital, confidence and liquidity naturally converge. In finance, technology can improve the pipes, but only markets can create the flow.

The invisible economy: when machines manage money without human intervention - for decades, finance has revolved around apps, portals and dashboards designed for human interaction, but that model may be approaching its end. As AI agents gain the ability to interact directly with blockchain infrastructure, financial activity could increasingly occur without human intervention. Portfolio management, payments, liquidity allocation and trading may become machine-driven processes operating continuously in the background. The future of finance may not be built around better apps, but around intelligent systems communicating directly with programmable financial networks.

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The great compute transition: how Bitcoin miners are reshaping AI infrastructure - a profound shift is reshaping digital infrastructure as Bitcoin miners increasingly redirect power, capital and data centre capacity toward artificial intelligence. Faced with declining mining economics following the Bitcoin halving and surging demand for AI compute, many of the industry’s largest operators are transforming into infrastructure providers for hyperscalers. The result is an historic reallocation of energy, capital and technological resources that could redefine both the future of AI and the long-term security model of Bitcoin itself.

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The blind spot in modern finance: why central banks need visibility into agentic dollar flows - as stablecoins and AI-powered agents increasingly transact outside traditional banking systems, central banks risk losing visibility into the money flows that underpin monetary policy, taxation and financial stability. This article explores how “agentic dollars” could create new blind spots for governments, accelerate digital dollarisation and weaken traditional policy tools. It argues that strategic blockchain monitoring, advanced analytics and real-time intelligence will become essential capabilities for preserving economic sovereignty in an era where money moves at machine speed.

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UK stablecoin regulation: the time is now - stablecoins have moved beyond cryptocurrency markets and are rapidly becoming part of the infrastructure underpinning payments, settlement and cross-border commerce. For the UK, the challenge is no longer whether to regulate stablecoins, but how quickly it can establish a framework that encourages innovation whilst preserving financial stability. With the US accelerating adoption and dollar-backed stablecoins gaining global traction, Britain faces a narrowing window to secure a meaningful role in the next generation of digital finance.

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A narrow window of opportunity

The urgent need for proper regulation cannot be overstated. Economic, technological and geopolitical factors all now demand immediate attention from those responsible for making decisions about the UK’s regulatory and economic policy. Stablecoins are no longer niche instruments confined to cryptocurrency markets - they are already mainstream. Stablecoins are increasingly deployed for payments, settlement, remittances, decentralised finance and cross-border transactions and when adopted at scale, they will become systemically significant components of financial infrastructure.

Post-Brexit competitiveness: now or never

The stakes could not be higher for the UK’s post-Brexit future. The UK’s strategic objective of retaining its pre-eminent position in financial services depends on how nimble and responsive it can be. HM Treasury, the Financial Conduct Authority and the Bank of England have all acknowledged that distributed ledger technology and tokenised finance are likely to significantly reshape financial markets. Stablecoins have already established themselves as a critical component of this future digital financial ecosystem, providing, as they do, a bridge between volatile cryptoassets and traditional fiat currency. But ambition, without more, is not enough. Without a functional and realistic regulatory framework, institutional adoption in the UK will remain unnecessarily limited. Large financial institutions, payment firms and regulated entities all want legal certainty before they commit to integrating stablecoins into mainstream financial activity. Any outstanding questions concerning redemption rights, custody, reserve backing, insolvency treatment, operational resilience and anti-money laundering compliance will only delay adoption and growth. And each delay allows jurisdictions with more agile frameworks to develop a competitive advantage. Proper regulation is the fundamental enabler of legitimate market growth.

The UK now has an opportunity to lead, rather than follow

The UK’s approach is distinctive and potentially advantageous - but only if implemented without undue delay. Integrating stablecoins into the existing financial regulatory architecture rather than treating them as entirely separate instruments is one of the reasons why the UK is in a position to set a global standard. The UK has learned from the mistakes made in the regulatory models of other jurisdictions (such as the US and Europe) and now has the opportunity to capitalise on that experience.

Critical national infrastructure at stake

The role played by stablecoins in the payments regime makes immediate action imperative. Stablecoins could potentially reduce the cost and speed of domestic and cross-border payments. Traditional international transfers often involve multiple intermediaries, substantial delays and significant fees, whereas stablecoin-based systems can enable near-instant settlement on a 24-hour basis. Given, however, that payments are part of systemic national financial infrastructure, if stablecoins become widely used for payments without adequate regulatory safeguards, the consequences will be severe. No system should wait until stablecoins are embedded in critical infrastructure before establishing robust standards, and there is no need for the UK to do so.

Sterling’s future hangs in the balance

Perhaps most critically, the UK’s monetary sovereignty will be affected by the way in which it handles and responds to stablecoins. If stablecoins backed by foreign currencies, particularly the US dollar, become widely used within the UK economy before credible sterling alternatives emerge, the role of sterling in digital transactions will be diminished and the march of dollarization will continue. The UK must act now to ensure that sterling-based digital payment instruments remain credible and competitive. Proper regulation can help foster trust in sterling-denominated stablecoins and support innovation in tokenised sterling markets.

The global race is underway

Stablecoins operate almost by definition across borders, and divergent regulatory approaches allow for regulatory arbitrage, under which firms structure activities in less demanding jurisdictions whilst still servicing UK users. The UK has an interest, therefore, in aligning aspects of its framework with emerging international standards developed by bodies such as the Financial Stability Board and the Bank for International Settlements. The balance is delicate but the requisite direction of travel is clear: regulate too restrictively and innovation will be driven offshore; regulate insufficiently (or inappropriately) and consumer interests and systemic stability are put at risk. Yet the greatest risk of all is prolonged inaction - achieving the correct balance is the central policy challenge facing UK financial regulation today, and it is a nettle that must be grasped. The debate over stablecoins is no longer about technology, it is about economic sovereignty, competitiveness and control of the future financial system. Stablecoins are becoming the digital cash layer of the internet economy. The countries that regulate them intelligently will attract capital, innovation, talent, and influence. Those that delay risk becoming consumers of other nations’ financial infrastructure. The deeper question is not whether stablecoins should be regulated. It is whether the UK wants sterling to remain relevant in a world where money moves at the speed of software. If dollar stablecoins become the default medium of exchange for global commerce, payments and digital assets, then the dollar’s dominance may extend far beyond traditional banking and into every digital transaction.

The real risk is not regulatory failure - it is regulatory hesitation. History suggests that financial centres rarely lose leadership overnight. They lose it gradually, one missed opportunity at a time. The UK has a narrow window to turn English law, regulatory credibility and financial expertise into a competitive advantage. If it succeeds, London could become the legal and financial home of tokenised finance. If it hesitates, the infrastructure of the next financial era may be built elsewhere, leaving Britain to operate on rails designed by others. In the twentieth century, nations competed to host banks. In the twenty first century, will they compete to host the code, digital money and settlement networks that replace them? “The time is now”.

The traditional financial system, for all its complexities, has historically provided central banks and state treasuries with a relatively clear picture of economic activity. Commercial banks, payment processors and regulated financial institutions act as intermediaries, generating data trails that enable comprehensive oversight, facilitate monetary policy transmission and ensure tax compliance. However, the advent of agentic USD stablecoins, i.e. US dollar stablecoins being used by autonomous, goal-driven AI agents operating on decentralised or semi-decentralised blockchain networks, is rapidly eroding this visibility.

USD v USD agentic quality and volatility analysis (1907-2031)

Source: London Digital Escrow

As discussed by Kennedy Kelly, potentially agentic USD could one day become legal tender. Given digital USD’s inherent appeal to AI agents, we could well see exponential dollarisation with the European Central Bank reporting: “European policymakers are actively worried that an influx of US dollar-backed stablecoins and reliance on American financial infrastructure could undermine the monetary sovereignty of the European Central Bank (ECB).” This shift moves economic activity onto rails that are, by design, more opaque to traditional surveillance methods. The anonymous or pseudonymous nature of blockchain-powered transactions, combined with the global and frictionless movement of agentic USD, creates a “blinding effect” for national authorities. Without granular insight into these flows, central banks lose their ability to effectively manage liquidity and inflation, whilst treasuries struggle to assess economic activity, enforce tax laws and manage national debt. In this new decentralised reality, strategic monitoring is the indispensable tool for reclaiming control. It is not about resisting the inevitable march of digital finance but about adapting to it by developing sophisticated intelligence capabilities that can penetrate the opacity of blockchain networks. For institutions such as the Bank of England and His Majesty’s Treasury, the ability to understand the dynamics and flow of agentic USD in and out of the UK is paramount to preserving their roles as guardians of financial stability and economic sovereignty for the following reasons

Moreover, the rapid growth of US dollar stablecoins such as USDC and USDT has already created a parallel financial infrastructure processing trillions of dollars annually. According to Visa’s on chain analytics platform, stablecoin settlement volumes now exceed many traditional payment networks. At the same time, autonomous AI agents are beginning to transact, negotiate and execute payments without direct human intervention. As these systems increasingly utilise digital dollars on blockchain networks, a growing proportion of economic activity may occur outside traditional banking visibility. The challenge for policymakers is not merely the existence of digital money. It is the potential loss of insight into where money is flowing, who is using it and how quickly it is moving.

Why visibility matters

Modern monetary policy depends on data. Central banks monitor money supply, credit creation, lending activity and transaction volumes to guide decisions on interest rates and liquidity management. If significant economic activity migrates onto blockchain networks using dollar-denominated stablecoins, traditional measures may become less representative of actual economic conditions. The issue is not theoretical; the European Central Bank has repeatedly warned that widespread adoption of foreign stablecoins could weaken domestic monetary sovereignty and increase dependence on external payment infrastructure. For countries such as the UK, the implications extend beyond monetary policy; if a growing share of commerce settles in tokenised dollars, governments may find it harder to:

· measure economic activity accurately

· monitor capital flows

· assess systemic financial risks

· enforce tax compliance

· evaluate the effectiveness of monetary policy

The velocity challenge

The future challenge may not be the quantity of digital dollars but their velocity. Traditional payments often move through multiple intermediaries and settlement processes. Blockchain-based stablecoins can settle globally within seconds and operate continuously. When combined with AI agents capable of autonomous decision making, capital could move across markets, asset classes and jurisdictions at speeds that exceed traditional policy response mechanisms. A machine does not wait for office hours, quarterly reports or central bank meetings. It can optimise liquidity, switch assets and move funds continuously. This creates the possibility of highly localised financial effects that emerge faster than conventional monitoring frameworks were designed to detect.

Building a new monitoring framework

The solution is not necessarily greater control over digital assets; it is better visibility. Governments and central banks increasingly need sophisticated blockchain intelligence capabilities equipped to understanding digital financial flows in real time. Several specialist firms already provide such capabilities including Chainalysis, TRM Labs and Elliptic which help governments and financial institutions analyse blockchain transactions, identify risk patterns and investigate illicit activity.

The erosion of visibility: a threat to policy effectiveness

The migration of economic activity to agentic USD fundamentally undermines the visibility that central banks and treasuries rely upon for effective policy implementation. This erosion of visibility manifests in several critical areas:

· hyper-velocity and algorithmic capital flight - even if the volume of agentic USD in the UK is small, its velocity could be orders of magnitude higher than sterling (GBP). This hyper-velocity can cause localised inflation in digital services, compute power or tokenised assets, completely de-coupled from the BoE’s interest rate levers.

· monetary policy blind spots - central banks require accurate and timely data on money supply, credit creation and transaction volumes to formulate and execute monetary policy. When a significant portion of the money supply exists as agentic USD outside the traditional banking system, these data points become incomplete or distorted. This creates substantial blind spots.

· money supply measurement - traditional M1, M2 and M3 aggregates become less representative of the true liquidity in the economy. The central bank cannot accurately gauge the total amount of money circulating, making inflation targeting and liquidity management highly challenging.

· interest rate transmission - the effectiveness of interest rate adjustments is diminished if a large segment of the economy can bypass local currency lending and borrowing by utilising agentic USD, which offers a yield tied to US Treasuries. The central bank’s signals may not propagate effectively through the dollarised segments of the economy.

· financial stability assessment - without visibility into agentic USD holdings and flows, assessing systemic risks becomes difficult. Concentrations of agentic USD in certain sectors or institutions (or sudden shifts in its usage) could pose unforeseen threats to financial stability that remain undetected by traditional surveillance.

Fiscal policy challenges and tax evasion risks

For state treasuries, the opacity of agentic USD transactions poses direct threats to fiscal policy and revenue collection:

· the transfer of seigniorage and economic vassalage - as economic activity dollarises via agentic USD, the UK effectively transfers its seigniorage profits directly to the US Federal Reserve and private US stablecoin issuers (who hold the underlying US Treasuries). Revenue is being lost at the point of issuance, not simply at the point of tax collection.

· tax base erosion - the pseudonymous nature of blockchain transactions can facilitate tax evasion. Without mechanisms to link agentic USD activity to identifiable taxpayers, governments risk a significant erosion of their tax base, leading to reduced public revenues and increased fiscal deficits.

· economic activity assessment - accurate GDP measurement, economic forecasting and budget planning rely on comprehensive data on consumption, investment and trade. If a substantial portion of these activities occurs in agentic USD without clear visibility, government treasuries will struggle to accurately assess the health of the economy and make informed fiscal decisions.

· capital control circumvention - in times of crisis, governments may need to implement capital controls to prevent destabilising outflows. Agentic USD, designed for frictionless cross-border movement, can easily circumvent such controls whereby rendering them ineffective and further undermining national economic management.

The objective is not surveillance for its own sake. It is ensuring policymakers retain sufficient visibility to make informed decisions.

Strategic implications for the UK

The UK remains one of the world’s leading financial centres. Maintaining that position requires understanding emerging financial infrastructure rather than reacting after adoption reaches scale. The UK’s recent work on digital assets, tokenisation and stablecoin regulation reflects growing recognition that financial infrastructure is becoming increasingly programmable. As digital dollars become embedded in global commerce, visibility into these networks may become as important to financial stability as traditional economic indicators. For decades, central banks have obsessed over the quantity of money. The next era’s defining challenge will be its velocity. Even if the total supply of agentic USD remains modest, AI-driven agents could circulate capital across borders, sectors and asset classes, at speeds of magnitude faster than traditional sterling flows. This hyper-velocity, continuous, autonomous optimisation of investment and liquidity risks creating sharp, localised inflationary pressures in compute power, digital infrastructure and tokenised assets - entirely detached from the volume of money in the broader economy. For institutions such as the Bank of England and His Majesty’s Treasury, investing in these capabilities is no longer an option but a strategic imperative. The future of their ability to manage their economies and protect their citizens’ financial well-being hinges on their capacity to see clearly in the decentralised digital landscape. The time for passive observation is over; the era of proactive, strategic monitoring has begun.

In Article 2 next week on the agentic US dollar, we look at the rise of programmable, autonomous money that can act, optimise and reallocate itself in real time. As these intelligent dollars proliferate, they are setting the stage for a new form of currency competition. Central banks, long accustomed to controlling money supply through traditional tools, now face a profound question: Can they compete with programmable money that moves at machine speed?

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SpaceX at $2 trillion: the private market superpower rewriting the rules of capital - SpaceX is approaching a valuation that would place it among the most valuable enterprises in history, despite remaining private. Its rise highlights a profound shift in global finance where value creation is increasingly concentrated in private markets long before public investors gain access. The implications extend far beyond aerospace. As institutional capital, tokenisation and digital market infrastructure evolve, the distinction between public and private capital markets may become one of the defining financial debates of the decade.

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Banking without banks: the parallel financial system already serving millions - decentralised finance (DeFi) is building a parallel banking system without traditional banks. By 2026, DeFi protocols have grown far beyond the $180 billion of assets that was seen in 2021, offering lending, trading and yield generation directly on blockchain. Platforms such as Uniswap, dYdX and GMX enable anyone with an internet connection to access global financial services, borrowing, lending and trading 24/7 with transparency and minimal intermediaries. This parallel system is already serving millions worldwide.

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The tokenisation of everything: how AI, real-world assets and on-chain markets are rewiring global finance - the global economy is entering a new phase where money, securities, funds and real-world assets are becoming programmable digital tokens managed increasingly by artificial intelligence. As tokenised assets surge from experimental pilots to multi-billion-dollar markets, capital is beginning to move at machine speed across borders, unconstrained by traditional institutions or geography. The result is a profound shift in how value, trust and financial power are created, allocated and controlled in the digital age.

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The next banking war is not about money: it is about identity - artificial intelligence is rapidly evolving from a tool into an autonomous actor capable of trading, managing capital and executing transactions. Yet the internet was never designed with a trusted identity layer for machines. As AI agents increasingly move both information and value, a fundamental question emerges: who verifies that an AI system is acting legitimately, and on whose authority? The institutions controlling digital identity may ultimately become the gatekeepers of the next global financial system.

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Real-time systems

Real-time systems of intelligence converge across instant data streams, autonomous AI generated agents and tokenisation. As we transition from batch to real-time and from human to machine, then envision existential risks to the internet as we know it. Automation and orchestration without effective guardrails or strict governance is a recipe for disaster; with many more bots than humans processing data online, then an urgency for decentralised, user-controlled identity wallets increases from all corners. From data munching big techs to big government surveillance, there is an ever growing trust gap. Global angst amongst the next generation rises as AI embeds into workflows, decisioning and results. The opportunity for global banks is now. There are potentially two primary contenders for the custodial benefits of issuing identity wallets online and at scale: they are JPMorgan Chase and Revolut - both have global ambition, top talent and long-term vision. Let us square, therefore, the circle between privacy and security.

Payments (analogue to digital)

From card-based electronic payments of the ‘get smart’ era to today’s smart contracts, identity access and governance has become patchwork at best and reactive at worst. The levels of fraud and scams continue to rise exponentially; networked individuals and state actors penetrate weak defences and poorly designed architectures; financial regulators supervise reactively from antiquated advice and manual guidebooks. Visa Direct and Mastercard Move are swiftly becoming instant data exchange networks and platforms - leveraging global trust and brand, they aim to become default ecosystems for the internet of value. However, these two behemoths have little ambition in becoming identity issuers or wallet custodians.

Financial fraud and scams

Nasdaq Verafin just released its annual Global Financial Crime Report: illicit financial activity is now at a staggering $4.4 trillion; fraud and scams account for over $500 billion causing material losses for the victim and further erosion of institutional trust; and, criminal organisations and state actors move illicit funds across borders, jurisdictions and sectors in just seconds. Meanwhile, regulated institutions remain buried in technical debt and blinkered by siloed culture. Ultimately, which regulated banks are poised to capture both the commercial and societal benefits from issuing identity credentials via digital wallets for cross-border value exchange? Possibly, Revolut and JP Morgan Chase lead the pack - both have global ambition, top technology and financial platform thinking.

Fintech evolution

One must admire the speed of change since 2008. The smart phone has become the operating system for cross-border value exchange. Chinese leaders launched WeChat and AliPay via QR code, bypassing card networks and opening up vast fintech potential. Bitcoin and other derived blockchain protocols enable P2P stablecoins linked to base fiat currencies - hence all these leap-frogging innovations and digital identity becomes ever more patchwork and fragmented.

Digital identity

At sovereign level Europe, Australia and India are leveraging digital identity systems for both accessibility and inclusion to support citizen services online:

· European Digital Identity Framework (eIDAS 2.0) - Europe is building digital identity wallets allowing citizens to prove identity and credentials across borders.

· Australian Trusted Digital Identity Framework (TDIF) - a framework of rules and standards enabling secure, trusted and consistent digital identity verification, so forming the foundation of national Digital ID legislation.

· Indian Unique Identification Authority of India (UIDAI) - India’s digital identity platform now supports over a billion citizens and underpins financial inclusion, payments and digital public services.

Technology vendors, including Okta to Ping, deliver identity access and governance to protect stakeholders, customers and employees from hackers and scammers; operating systems from closed Apple iOS to open Google Android continuously monitor their ecosystems of applications to maintain data safely and securely. Moreover, banks use a patchwork of federated systems, third party support and proprietary databases to reduce fraud and protect their customers; SWIFT moves government fiat, and stablecoin platforms move digital assets. We picture a lack of interoperability between networks, systems and applications - the internet was never designed with an identity layer, but here we are. What would Agent 99 do?

Apps and infrastructure converging

Fintechs have taught legacy banks how to better serve their customers via better front end experiences. From cash to stablecoins and from batch to instant, digital rails collapse monolithic IT architectures replacing static core systems of record; agentic AI enables autonomous workflows horizontally across departments, borders and even jurisdictions; modern and scalable IT systems are continuously executing, highly automating and tightly interconnecting; table stakes are graph matrices and algorithms of BigTechs such as Facebook aka Meta; cloud technologies combine with data-intensive AI for instant decisioning without human inputs. Hence, we need far more data governance and codebase maintenance as data lineage and leakage get worse and the financial services industry needs KYA or know-your-agent tooling immediately to identify these machines and bots transferring money online on behalf of humans and entities. As the dream of Web3 and decentralised finance nears, identity wallets issued by trusted and regulated banks should help us all cross the divide resulting in a safer online world, including:

· systems that are transparent and verifiable

· networks that are global from day one

· economic models that align users, creators, developers and operators.

Infrastructure that does not depend on a small number of intermediaries

This half of this decade will shape the internet’s future for generations to come, so let’s help the banks issue identity and restore institutional trust for all. For decades banks protected money, governments protected identity and technology firms-controlled access to information. Yet agentic AI may collapse these boundaries into a single problem. An autonomous machine trading assets, initiating payments, signing contracts and interacting with governments cannot simply rely on usernames and passwords designed for humans. The internet was built around connectivity, not trust. And that design decision mattered little when people moved information; it becomes far more consequential when machines begin moving money, assets and legal rights. The institutions that issue and verify trusted digital identity may not simply control authentication. They may ultimately determine who can participate in the economy itself. So, the question is no longer whether AI needs an identity layer - the question may be whether future citizens, companies and AI agents require permission from whoever owns it.

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The lost decade of capital formation
Public equity markets exist, in theory, to channel savings into productive enterprises. Companies raise capital, invest it, create jobs and generate returns. That is the textbook. The reality of the past decade has been almost the precise opposite as, since the global financial crisis, the dominant use of public markets by large US corporations has been to retire their own shares rather than issue new ones. As far back as 2014, the Bank for International Settlements noted that US share buybacks had approached their pre-crisis peak of nearly $950 billion in the two-year period 2013-14, with net new equity actually falling by at least $610 billion once repurchases were netted against issuance. The US corporate sector was, in aggregate, a net destroyer of public equity, not a creator of it. And that trend has only accelerated. Stock buybacks continued with an estimated $1.2 trillion being bought back, according to JP Morgan, with expectations of surpassing $1.8 trillion in 2026. This figure dwarf’s new equity issuance through IPOs, secondary offerings and employee stock option grants, and represents 2-3% of total US equity market capitalisation (50% to 100% more than the annual pay out from dividends). A dramatic example of this is that of Warren Buffet’s shareholding in American Express (Amex), which has doubled in the late 1990s from 10% to over now 20%, simply because Amex has been offering share buybacks for decades (which Buffet has refused, hence his % ownership has grown).

So, why do companies do this? The honest answer has little to do with shareholder value theory and rather more to do with how executives get paid. When compensation is structured around earnings per share (EPS) targets and share price performance, the basis for most executive bonuses and long-term incentive plans - there is a powerful incentive to shrink the denominator rather than grow the numerator. Buying back shares mechanically boosts EPS without the business needing to earn a single dollar more in profit. Directors hit their targets, options vest, bonuses are paid and the underlying business may have invested in nothing. As one analysis noted, executive stock compensation is generally based on share price and not market capitalisation, creating incentives to return capital to shareholders by foregoing marginally positive projects - or through the issuance of debt, effectively cannibalising the future to flatter the present. The consequence is that, for the better part of fifteen years, the S&P 500 has functioned less as a mechanism for allocating capital to growing businesses than as a vast share repurchase programme underwritten by cheap debt and, more recently, by AI-driven profit expectations. Public markets have been a place where capital goes to be extinguished, not created.

Now everyone wants to raise capital at once
Into this environment, the AI industry is about to arrive with a very large bucket, and SpaceX is not alone; three of the most valuable private companies in the world are preparing to hit public markets in rapid succession. Moreover, SpaceX is targeting a $75 billion raise. OpenAI, currently generating over $20 billion in annualised revenue but losing an estimated $14 billion per year, is eyeing late 2026 or early 2027. Anthropic, which has crossed $30 billion in annualised revenue on extraordinary growth, is in talks to raise $50 billion at a $900 billion valuation ahead of a potential October listing. In total, three companies are preparing to raise close to $200 billion from public markets within a matter of months. Certainly, this is already generating concern on Wall Street. The time windows for these three major IPOs are extremely concentrated, creating resonance with historical empirical cases of the IPO liquidity crowding-out effect. When very large issuances absorb the available pool of institutional capital, those smaller companies seeking to list face a harder road, higher required yields, lower valuations or the decision not to go public at all. The broader private market backdrop makes this more acute. Around 50% of global venture capital went to AI in 2025; furthermore, that share jumped to approximately 80% in Q1 2026, powered by giant financings for OpenAI, Anthropic and xAI. Meanwhile, only seventeen unicorns went public in 2025, leaving $4.3 trillion of value locked in private market and thousands of companies still priced off the 2021 vintage that no longer reflects reality. The question is not simply whether there is demand for SpaceX shares, there clearly is. The question is whether the gravitational pull of AI mega-issuances leaves anything for the rest of the queue. For companies outside the AI orbit, consumer businesses, industrials, mid-market fintech (anything that cannot credibly claim to be transforming the world with artificial intelligence), the IPO window that SpaceX might theoretically re-open could, in practice, become narrower than ever.

One man, 85% of the votes
The third and, perhaps, most important question raised by the SpaceX IPO is not financial at all - it is structural. SpaceX’s S-1 filing with the SEC confirms that Elon Musk holds 12.3% of Class A shares and 93.6% of Class B shares, which carry ten votes per share rather than one (giving him a combined voting power of 85.1%). Public shareholders purchasing Class A shares will gain an economic stake in the company, but no meaningful ability to influence outcomes on any matter requiring shareholder approval. The prospectus also confirms that SpaceX will claim controlled company status, exempting it from those stock exchange requirements mandating that the majority of the board be independent. Musk will serve simultaneously as CEO, CTO and board chairman, and will retain the power to elect, remove or fill vacancies among Class B directors. Moreover, mandatory arbitration clauses further limit shareholders’ legal recourse. This is not without precedent - dual-class structures are common amongst US tech giants such as Meta and Alphabet, typically giving founders 10 or 20 votes per share versus one for ordinary investors. Musk himself has been pursuing a similar arrangement at Tesla, where he has publicly argued that 25% voting control is appropriate, noting that it is “not so much that I could control the company, even if I go bonkers.” At SpaceX, he has achieved something far more powerful than 25%.

The SpaceX structure raises a question that markets have so far declined to take seriously: what is the actual value of shares that carry no governance rights? Investors are being asked to take on the full economic risk of the enterprise whilst ceding all strategic control to a single individual who also controls Tesla, X, xAI and the Boring Company, who holds an active political role and whose stated ambitions include colonising Mars. The decision about whether SpaceX’s capital allocation serves shareholders or serves that broader personal agenda rests entirely with one man, regardless of how many public shares are sold. There is a plausible bull case: Musk’s track record at SpaceX is genuinely exceptional. The company generated an estimated $18.7 billion in 2025 revenue and is the only profitable entity among the wave of AI-era mega-IPOs. Starlink is a real business with real margins - the Falcon 9 programme is a genuine engineering triumph. Perhaps founder control, in this specific case, is a reasonable trade for access to a company that would otherwise remain private. But the precedent is troubling. If SpaceX succeeds in raising $75 billion whilst offering public shareholders no governance rights whatsoever, it normalises a template in which the public markets exist purely to provide liquidity and capital to founders (whilst accountability flows in only one direction). The function of markets, price discovery, capital allocation and the disciplining of management through shareholder oversight is effectively suspended. Investors become passengers, not participants. For Digital Bytes readers who follow the governance questions in digital assets and tokenisation closely, the parallel is worth noting. The debates around voting rights, token structures and founder control in the crypto space have always been presented as a deficiency of that sector compared to regulated public markets. The SpaceX IPO suggests the gap may be narrower than assumed.

The bigger picture
Taken together, these three threads - the long era of net buybacks, the AI capital crowding effect and the normalisation of super-voting structures - describe a public equity market that has drifted some distance from its original purpose. Capital is increasingly concentrated, governance is increasingly founder-controlled and the capacity of markets to allocate resources broadly and efficiently is increasingly questionable. SpaceX may well be a spectacular investment: but it is worth remembering - as the hype builds, buying a share in SpaceX next week means accepting that you have no say in how your money is used, and that the man spending it has a fair few other things on his mind as well.

The quiet merger: AI, blockchain and banks are secretly rebuilding global finance - artificial intelligence, blockchain infrastructure and traditional banking are quietly converging into a new financial architecture that is automating trading, compliance, liquidity management and settlement. AI is becoming the intelligence layer, blockchain the infrastructure layer and banks the regulated distribution layer of programmable finance. Together, they are transforming how capital moves, risks are managed and transactions settle globally. This silent merger may become one of the most important financial shifts since the creation of electronic banking itself.

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Your next boss may not be human: how AI could hire you, set your salary and rewrite the future of work - the debate around artificial intelligence has largely focused on jobs being replaced. A more disruptive possibility is emerging: AI may increasingly become the employer itself. As intelligent systems begin allocating work, negotiating compensation and managing human labour, the balance of power could shift dramatically. Future careers may depend not only on skills and experience, but on a person’s ability to prove uniquely human value and negotiate effectively with machines that possess near-perfect information.

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Tokenised treasuries, instant settlement and 24/7 markets: the future of capital markets has arrived - tokenised US Treasuries have surged beyond $15 billion, transforming what began as a blockchain experiment into institutional-grade financial infrastructure. By combining the safety of government securities with instant settlement, 24/7 trading and programmable functionality, tokenised Treasuries are increasingly attracting asset managers, banks and DeFi platforms alike. The implications extend far beyond digitisation: they challenge traditional market structures, improve capital efficiency and may redefine how liquidity, collateral and investment products operate globally.

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Not your keys, not your justice: how self-custody is breaking traditional asset recovery - as self-custody wallets and decentralised exchanges rapidly grow, legal recovery of Bitcoin and stablecoins is becoming dramatically harder. Over 580 million crypto users globally now increasingly control assets directly through private keys rather than regulated intermediaries, whilst DeFi volumes exceeded trillions of dollars in 2025 alone. This shift is eroding the ability of courts, banks and exchanges to freeze or recover digital assets. In practice, blockchain is transferring financial control from institutions and judges toward individuals, code and cryptographic sovereignty.

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However, despite the sharp rise in absolute volumes, illicit activity had actually declined slightly as a proportion of total crypto transaction volume, falling from 1.3% in 2024 to 1.2% in 2025. And more recently, courts and law enforcement agencies have experienced a “downward trend” involving the recovery of digital assets. Where previously disputes over stolen funds, hacked accounts or matrimonial division frequently targeted centralised exchanges, such actions have diminished as assets have moved ‘off platform’. When private keys are held solely by an individual, exchanges hold no custodial responsibility or relevant and current information and cannot compel transfers, even under court order. This trend is particularly evident in civil litigation with the number of successful recoveries through court-mandated orders having fallen sharply. Judges and legal practitioners now encounter situations where defendants assert that assets are inaccessible due to lost or forgotten private keys. Such claims, while sometimes genuine, have also become a convenient defence in contentious proceedings, especially when digital assets are held by one of the parties.

⁠

A striking illustration of this phenomenon appears in divorce proceedings in California, a jurisdiction with community property laws that typically require equitable division of marital assets. In several high-profile and unreported cases, husbands facing court orders to transfer Bitcoin or USD stablecoins to their former spouses have responded by declaring that they no longer possess access to the relevant private keys. These claims create significant enforcement challenges for the courts since, unlike traditional bank accounts or brokerage holdings where institutions can be ordered to freeze and disburse funds, self-custodied digital assets leave judges with limited practical recourse. Attempts to compel key disclosure often fail when the defendant maintains that the keys were misplaced, forgotten, or never recorded. Forensic blockchain analysis can trace transaction history but cannot recover inaccessible private keys. Consequently, many such cases result in incomplete asset division or protracted legal battles with reduced success rates for the claiming party. This pattern has contributed directly to the overall decline in viable legal recovery actions. Family law practitioners now routinely advise clients on the difficulties of tracing and enforcing claims over self-custodied cryptocurrencies, leading to fewer filings or settlements that exclude digital assets altogether. ⁠

Why self-custody reduces recovery success rates

The technical architecture of blockchain technology underpins this shift. Once assets leave a centralised exchange, control resides exclusively with the holder of the private keys. Centralised platforms can comply with court orders only whilst they maintain custody. As self-custody becomes ubiquitous, the pool of recoverable assets held by intermediaries shrinks dramatically. Moreover, non-custodial DEXs leave no central entity with compliance obligations. Transactions occur pseudonymously on public blockchains, further complicating identification and enforcement. Even when a court identifies a wallet address, without the private key, enforcement remains impossible. This reality has led to a measurable decrease in both the initiation and successful conclusion of digital asset recovery litigation. Meanwhile, the decline in successful recovery for victims of fraud or judgment creditors carries significant consequences. For law enforcement, it complicates efforts to trace proceeds of crime, ransomware payments, or fraud. Regulatory bodies face challenges in supervising a financial ecosystem where assets increasingly exist outside traditional intermediaries. Banks, payment processors and regulated exchanges experience reduced relevance in the digital asset space, prompting strategic adjustments in their business models. As we see more real-world assets such as equities, bonds, funds even the home you reside in being tokenised, the problem of not being able to track and trace an individual or a corporates digital assets is increasingly set to become a challenge and relevant for many.

For owners of digital assets, self-custody offers enhanced privacy and autonomy but introduces personal responsibility for security and key management. The risk of permanent loss through forgotten keys or theft without recourse represents a trade-off that many users now willingly accept. However, legal systems worldwide are adapting slowly - some jurisdictions have introduced legislation requiring disclosure of digital asset holdings in divorce or insolvency proceeding, yet, as observed, enforcement remains problematic with a recalcitrant key holder. Courts have begun considering creative remedies, such as ordering defendants to assist in recovery to the best of their ability, but these measures often prove ineffective against determined self-custody users. Several factors have accelerated the move toward self-custody. Improved user interfaces for hardware wallets, educational campaigns on “not your keys, not your coins” and growing distrust of centralised platforms following high-profile failures have all played a role. The maturation of layer-two solutions and cross-chain bridges has further simplified non-custodial trading whereby reducing friction for everyday users. However, as DEX liquidity deepens and transaction fees decrease, the economic incentive to remain on centralised platforms diminishes. Users now enjoy greater flexibility, lower costs and enhanced privacy - all whilst removing intermediaries from the recovery equation. However, regulators confront a difficult balancing act; encouraging responsible self-custody whilst maintaining effective oversight requires innovative approaches. Proposals include mandatory key escrow for certain high-value holdings or enhanced blockchain analytics tools, yet such measures risk undermining the core principles of decentralisation and individual sovereignty that drive adoption. Ultimately, the decrease in legal recovery may force a revaluation of how jurisdictions define and treat digital assets in civil and criminal proceedings. Traditional property law concepts struggle to accommodate assets that exist as cryptographic keys rather than entries in institutional ledgers.

Strategic outlook and recommendations

It would be prudent for individuals to weigh the benefits of self-custody against the responsibilities it entails; robust key management practices, multi-signature setups and inheritance planning become essential. For legal practitioners, early identification of digital assets and creative use of forensic tools remain critical, even as recovery success rates decline. Exchanges and intermediaries must innovate by offering hybrid services that combine convenience with greater user control, such as optional self-custody bridges or insured key recovery mechanisms. Policymakers should focus on education and clear disclosure requirements rather than attempting to reverse the irreversible trend toward decentralisation. The rise of self-custody marks one of the most profound transfers of financial power from institutions to individuals in modern history, yet it also exposes a growing legal and regulatory vacuum. Courts can freeze bank accounts, seize property and compel intermediaries but they cannot recover cryptographic keys that no longer exist, or are claimed to be lost. As trillions of dollars of value migrate into self-custodied wallets and decentralised systems, the traditional assumptions underpinning asset recovery, inheritance, divorce law, fraud enforcement and financial supervision are beginning to fracture.

The solution is unlikely to be a reversal of decentralisation. Instead, the future may require new legal frameworks, programmable identity systems, insured recovery mechanisms, multi-signature governance and optional “lawyer in the loop” digital escrow models that preserve sovereignty whilst enabling enforceability. The challenge is no longer technological - it is whether legal systems can evolve quickly enough to remain relevant in a cryptographic financial world.

Tokenised US Treasuries global market value

Source: app.rwa.xyz/treasuries (live figures)

What actually are tokenised treasuries?

Traditional US Treasury instruments (including T-bills, T-notes and Treasury bonds) are tokenised on the blockchain. Each token is 1 to 1 backed by government debt securely held by licensed financial institutions, enclosing one of the safest asset classes in digital form. Several interconnected infrastructure layers power the mechanics; asset managers hold actual Treasury securities or Treasury-backed money market fund shares with regulated custodians. Blockchain tokens, mostly using the Ethereum platform, represent these assets and smart contracts automate token issuance, transfer and redemption, which previously needed manual involvement. BlackRock’s BUIDL (BlackRock USD Institutional Digital Liquidity Fund), currently valued at over $2.4billion, uses a network of trusted partners and technologies to issue and custody the US Treasuries, demonstrating how blockchain technology and traditional finance interact. The fund invests in cash, US Treasury notes and repurchase agreements with BNY Mellon holding the assets and Securitise providing the blockchain infrastructure and tokenisation technology.

Investors can hold transferable digital securities (tokens) in crypto wallets, trade them on secondary markets or integrate them into decentralised finance (DeFi) protocols. Crucially, these tokens maintain the credit quality and safety of traditional Treasury securities whilst leveraging the operational advantages of blockchain technology. Yield is distributed either automatically through token rebasing or via stablecoin dividend payments. Circle’s USYC accumulates interest in the token balance whilst BlackRock’s BUIDL distributes returns separately. However, despite appearing technical, this variation affects token integration with DeFi protocols and tax treatment. Regulatory status is crucial for these devices since, unlike cryptocurrency or uncontrolled tokens, registered investment businesses or financial institutions issue tokenised treasuries under securities rules and monitoring. This regulatory compliance gives institutional investors legal assurance for large capital deployment whilst retaining safeguards for Treasury securities investors.

Institutional adoption of tokenised treasuries has accelerated dramatically (as the above chart illustrates) due to multiple complementary factors that address longstanding challenges in both traditional and digital asset markets. Traditional treasury trading delays settlement by T+1 or T+2 but since tokenised versions settle instantly, capital is not locked up during the settlement window. Efficiency means savings and better capital utilisation for billion-dollar organisations with perhaps the most immediate benefit being capital efficiency. Traditional treasury markets have ‘float periods’ - i.e. time gap between when a financial transaction is initiated and when the funds can be used. Eliminating even one settlement day may save up hundreds of millions in operating capital for multibillion-dollar portfolio managers and the capacity to rapidly switch positions 24/7 affects portfolio management tactics, allowing for more dynamic allocation decisions. Meanwhile, DeFi lending marketplaces prioritise tokenised treasuries. As protocols accept BUIDL and other tokens as high-quality collateral for borrowing, institutions may access liquidity without selling yield-generating assets. Tokenised treasuries become more useful and popular as more DeFi protocols accept them, fostering protocol integration.

Essentially, the settlement infrastructure comparison shows that blockchain-based and traditional systems differ in architecture, efficiency and operating paradigms, which affect capital markets. Traditional Treasury settlement often involves a number of intermediaries; the DTCC is the major securities repository and clearinghouse for most US securities transactions, including Treasuries. Trade matching, clearing and ultimate settlement take several days, and various institutions co-ordinate cash and securities movements throughout market hours. BlackRock’s Ethereum-based tokenisation infrastructure, developed with Securitise, enables 24/7 trading, rapid settlement and programmable compliance. Without doubt, these capabilities solve problems in traditional fixed-income markets, where settlement takes days and trading hours are limited. Blockchain-powered settlement is fundamentally different - atomic exchanges either complete immediately or do not. Smart contracts verify conditions, transfer tokens and update distributed ledger ownership records in minutes or seconds. Moreover, since markets are open 24/7, global traders may trade across time zones without business hours. Investors may effortlessly shift these assets between blockchains using “onchain shares” for quick settlement and programmable processes. Permissioned systems keep entry low and reduce regulatory risk by allowing only pre-approved businesses to participate. However, the change is complicated. The complete post-trade infrastructure stack must be upgraded, and integrating new settlement rails with decades-old systems, regulatory frameworks and operational procedures is the difficulty, not blockchain capacity.

Instant settlement fundamentally alters risk; traditional settlement windows provide mistake detection, security sourcing and cash mobilisation. Pre-funded positions and real-time risk management are needed for tight deadlines; T+0 settlement compresses counterparty risk does not eliminate it. In addition, operational procedures must handle settlement failures and exceptions in real time instead of hours or days. Certainly, these challenges are justified; settlements take minutes instead of T+2 days. Finance teams use smart contracts to automate treasury procedures in real time - treasury interoperability across chains, platforms and jurisdictions requires new custody, compliance and transparency requirements. Tokenised treasuries offer the potential to alter change financial market’s structure, accessibility and functionality, extending beyond operational efficiency. With lower requirements, individuals and smaller institutions can immediately access high-quality financing; traditional Treasury markets have high minimum investments and complicated access processes that constrain major organisations. Hence, tokenisation allows fractional ownership whereby enabling investors to own stakes of hundreds rather than hundreds of thousands of dollars, therefore extending the investment base. Rather than simply placing existing assets on the blockchain, tokenisation rebuilds financial infrastructure by using programmability, composability and interoperability as design principles. The seamless interoperability of blockchain protocols, smart contracts and dApps, which allows developers to compose new services using existing on-chain code as modular ‘Lego’ blocks. Tokenised treasuries can serve as yield-bearing assets - borrowing collateral, automated market maker liquidity and stablecoin backing. This multi-functional utility maximises capital efficiency and enables complex automated tactics that traditional markets cannot implement because of custody and operational restrictions. DeFi protocols can use tokenised treasuries, such as BUIDL, as collateral so as to increase liquidity and create synthetic assets. In addition, on-chain data analytics and smart contracts provide real-time risk assessment and dynamic pricing, saving investors and regulators time.

Moreover, international accessibility changes capital flows. Complex correspondent banking ties, foreign exchange conversions and cross-border regulatory clearances characterise traditional Treasury markets; global tokenised treasuries trade on blockchain networks, so enabling rapid cross-border settlement without middlemen. Certainly, the ramifications are significant for overseas investors seeking dollar-denominated, risk-free return without traditional banking infrastructure. In recent guidelines, the International Organization of Securities Commissions stated that tokenised money market funds are being used as reserve assets for stablecoins and as collateral for crypto transactions. After stablecoins, JPMorgan has identified tokenised money market funds as the next frontier for portability and collateral efficiency. The mass use of tokenised Treasuries by 2026 is more than simply a technological improvement. It will deepen capital market changes by making debt move faster, yield more accessible, markets programmable and interoperability important. Ultimately, the competitive landscape is changing; tokenised money market funds with better operations are challenging traditional funds and blockchain settlement must be integrated into bank treasury services or risk losing clients to more technologically advanced competition. In a future of immediate and programmable settlement, custodians, transfer agents and settlement systems face existential problems. Furthermore, these structures centralise control, raising questions about how blockchain might “capture” its open potential. The permissionless ethos of public blockchains clashes with that of permissioned ones as huge financial institutions dominate tokenised treasury markets. Most tokenised securities are institutionally controlled; hence, this discussion will determine tokenisation and whether it expands or consolidates financial power.

In under three years, tokenised treasury has moved from proof-of-concept to production-scale infrastructure. More institutions are developing solutions, more DeFi protocols are incorporating tokenised treasuries and more use cases for programmable government securities are expected to drive exponential growth. It is a fundamental shift: blockchain, smart contracts and distributed ledger technology are turning traditionally slow, intermediated assets into programmable, instantly settleable, 24/7 global instruments. Therefore, the real question this chart forces us to ask is: are we witnessing the quiet reinvention of money and markets, where liquidity, access and innovation become borderless and ‘always-on’? What took centuries of infrastructure to build in traditional finance is now being rebuilt in months onchain. The implications for yield, capital efficiency and who gets to participate in the world’s safest assets are profound.

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