Tokenization push could pull trillions of dollars into DeFi, StanChart says

Decentralized finance (DeFi) is poised to become a core layer of infrastructure for tokenized financial markets, as trillions of dollars worth of assets move onto blockchains rails in the next few years, said global bank Standard Chartered's analysts.

In a research report published Monday, Geoffrey Kendrick, the bank's global head of digital assets research, estimated that tokenized assets on public blockchains could reach $4 trillion by the end of 2028, evenly split between stablecoins and tokenized real-world assets (RWA) such as bonds and funds.

As those assets move onchain, they will increasingly rely on DeFi protocols for trading, lending and collateral management rather than traditional financial infrastructure, Kendrick argued.

"DeFi protocols are the infrastructure native to tokenized assets," the report said.

The report centered on the concept of "composability," a feature of blockchain-based markets where assets, exchanges, lending systems and settlement rails operate on the same shared ledger. That allows a tokenized asset to serve several functions at once: earning yield, backing a loan and remaining tradable simultaneously.

Traditional finance, by contrast, still relies on separate intermediaries for custody, settlement and collateral management, often creating delays and additional costs, the report added.

Kendrick pointed to BlackRock’s (BLK) tokenized Treasury fund BUIDL, issued by tokenization specialist Securitize (CEPT), as an early example of how tokenized assets are already being integrated into DeFi applications. The fund can simultaneously generate Treasury yield, serve as collateral and interact with other lending protocols without requiring separate bilateral integrations.

Kendrick said clearer U.S. regulation could accelerate the shift. The CLARITY Act, which advanced last week the Senate Banking Committee, as a potential catalyst for bringing more institutional assets onchain if it gets passed into law later this year.

That growth in assets and onchain activity will, eventually, translate into higher valuations for tokens of DeFi protocols. "More assets moving on-chain is likely to mean more throughput on DeFi protocols, supporting protocol token prices," Kendrick said.

While crypto exploits, such as the recent Drift and KelpDAO hacks draining nearly $600 million in digital assets altogether, put a dent on DeFi, the report argued that larger protocols are becoming more resilient through audits, insurance mechanisms and more professionalized governance structures.

"Well-established DeFi protocols appear to be in a strong position to build the institutional links required to scale up," Kendrick wrote.