Piero Cipollone: Sparking the Transformation of Finance - Tokenisation and the Role of Central Banks

Why It Matters

If tokenisation can lower intermediation costs, borrowers and savers could enjoy cheaper credit and higher returns, reshaping the financial services landscape. Central banks’ engagement will be pivotal in turning the technology promise into market reality.

Key Takeaways

• US financial intermediation cost stays near 2% of assets
• Tokenisation could deliver efficiency gains beyond historic finance tech
• Central banks may define standards to enable tokenisation rollout
• Benefits depend on gains passing from savers to borrowers
• Regulatory clarity and scalable DLT are critical adoption factors

Pulse Analysis

The persistent 2% cost of financial intermediation—measured as a share of assets—has survived waves of innovation from the late 19th century onward. While electronic trading and dematerialisation accelerated transaction speed, they left the fundamental price of connecting borrowers to savers largely unchanged. This historical inertia sets the stage for tokenisation, a technology that digitises assets into programmable units on distributed ledgers, promising to streamline settlement, reduce custodial layers, and cut friction in capital allocation.

Tokenisation’s potential hinges on three interrelated conditions. First, a robust, interoperable DLT infrastructure must scale to handle high‑volume, cross‑border transactions without compromising security. Second, regulatory frameworks need to evolve, offering clear guidance on token classification, custody, and investor protection. Third, central banks can act as catalysts by establishing standards, providing settlement guarantees, and possibly issuing digital sovereign tokens that anchor the ecosystem. By addressing these pillars, tokenisation could break the historical pattern and deliver tangible cost reductions to end‑users.

For market participants, the stakes are high. Asset managers could unlock liquidity in traditionally illiquid holdings, while corporates might access cheaper financing through token‑based bonds. However, if gains remain trapped within intermediaries, the promised distributional benefits will evaporate. The coming years will test whether central banks and regulators can align incentives, foster innovation, and ensure that efficiency gains flow through to borrowers and savers, ultimately reshaping the economics of finance.