Wall Street Banks Look to Tokenized Assets for New Growth

Goldman Sees More Trading and Clients

Wells Fargo Says It Uses Them for Cross-Border Transfers

Morgan Stanley Focuses on Investment Advice

Major Wall Street banks are identifying tokenized assets, which enable stocks, bonds and other instruments to trade on blockchain networks, as a new growth engine. They view the technology not as a force that would reduce the role of traditional financial firms, but as an opportunity to expand trading, remittances and wealth management. Wells Fargo is already using tokenized deposits to process cross-border transfers.

CoinDesk reported on Oct. 17 that executives at Goldman Sachs, Wells Fargo and Morgan Stanley recently outlined business applications for tokenization during their third-quarter earnings calls. Tokenization refers to representing rights to financial products or real-world assets as digital tokens on a blockchain. It can simplify trading and settlement and reduce the time required to transfer assets.

Goldman Sachs is focused on trading. Chief Executive Officer David Solomon said on the bank's Oct. 13 earnings call that tokenization and decentralized finance, or DeFi, prediction markets could boost the firm's trading revenue.

Solomon said there were concerns about 50 years ago that the computerization of stock trading could erode the firm's trading revenue. Goldman adapted to that shift and instead expanded its equities business. More products and trading activity, he added, could help the bank win new clients and broaden its distribution channels.

Goldman Sachs launched its in-house tokenization platform, GS DAP, in 2022. The European Investment Bank used the platform that year to issue a 100 million-euro digital bond. Goldman also participated in a live transaction in July for a tokenization service run by DTCC, the U.S. securities depository and clearinghouse.

Wells Fargo is seeking opportunities in cross-border remittances. It processes cross-border payments using tokenized deposits, which represent bank deposits on a blockchain. Chief Financial Officer Michael Santomassimo said funds reach the recipient's account in less than two minutes. The service is already in use, though volumes remain small.

For Wells Fargo, which has a relatively smaller overseas branch network, the technology could expand its international payments business without adding physical locations. The bank is also reviewing tokenized securities, real-world assets and crypto trading services for wealth-management clients.

Morgan Stanley expects investment advice to become more important as assets become easier to move. Chief Financial Officer Sharon Yeshaya said that in a tokenized environment, assets can be transferred faster and more easily, but investment advice will still be needed.