Tokenization in Banking: Stablecoins & Digital Assets | Parag Monteiro

Alex: But let's talk about real life cases, if you can share those. I'm trying to understand the real cases that banks implementing using tokenization and real problems they trying to solve. Can you share that? Hello everybody and welcome to another Curisti code podcast episode. And today I'm joined by Parag Manteiru, global head of digital asset platforms at Standard Chartered bank where he's building the infrastructure to enable the bank to transition to a tokenized world of financial services. In this episode we're diving into whether real world asset tokenization is the future of finance or just blockchain latest hype cycle. Welcome to the show.

Parag: All right, thank you, Alex. Pleasure to be here. Look forward to the conversation.

Alex: All right, that's yet another episode about tokenization. I mean, always curious to hear very simple explanation about what tokenization is from people who are actually working in the industry. So please Parag, explain tokenization like M5. What does it actually mean to put a building a bond on a blockchain or any other real life our assets.

Parag: So before we begin, Alex, maybe just a word of caution to our listeners. So none of what I say is any form of financial advice. Everyone should do their own research and of course these opinions are my own, do not necessarily reflect everything that I do at the bank at all times. To come to your question about explaining tokenization for a five year old, maybe, maybe not exactly a five year old, but I can explain tokenization in a way that at most consumers actually should understand because I think without realizing it, we consume tokenized services very often. It's just that they may or may not be on a blockchain. So let me use the example of Google Pay or Apple Pay, which all of us, many of us use quite often when we just click our phone, use our face ID or a thumbprint and pay for services. Now what is happening behind all this? What is happening IS Visa or MasterCard have taken the 16 digit number on your credit card and then tokenized it, which is essentially a digital representation of your credit card. That digital representation now lives on your device and the device recognizes you, therefore authenticates you. And now you can pay for services when you walk along the street go into a store and your credit card does not need to be with you. It can be at home, it can be in your pocket, it can be anywhere else. So that is already a form of tokenization that we already know because it is digital representation of a financial asset. It has been cryptographically encrypted, which means no one else can use it the way you can. And it has been connected to a device in this case. So that is a form of tokenization. We all realize now you might obviously ask, or someone might ask, okay, what does that have to do with blockchain? Because obviously this podcast is about the blockchain. So the difference between tokenization in that form is that the data that you as a consumer hold, which is your own data, which is your identity data, and the information and credit card is managed by a centralized service such as Google or Apple or Visa or MasterCard. When we do tokenization on the blockchain, this sits on a decentralized service which is a blockchain and the data is still owned by you and can be controlled by you by access to public and private keys. Now we're getting into technical details, but essentially what my point is tokenization exists is just that what we are seeing now is representation and movement of this tokenization onto a blockchain so that we can control the data that we own and use it where we want to use it without it being controlled by centralized third parties like the large tech companies. In the example that I gave, great explanation.

Alex: I love the link you made to things that we use in every day. Thank you for that. And I'd like to take advantage of you being part of the bank and understand that you may not be able to disclose certain aspects. Maybe we can talk more in general terms, but still. So standard chart is 170 years old bank. So it's quite conventional institution and been around for years how this kind of institutions turn their heads towards tokenization. Maybe you can share your experience with Chart, maybe something else. I'm just interesting, you know, to see how conservative institutions like that actually go through this transformation.

Parag: Transformation. Banks, like any other organization are made up of people, right? And they're different kinds of people. And I genuinely believe that people's behaviors are the way people behave are because of the incentives that they're given. Now in the bank, there are different kinds of people. There are people in frontline, there are people in sales, the people in product, platform and innovation, such as myself, and there are people in compliance. Each of them have a certain job to do right. And they need to do their job. As you mentioned, we are a 170 year old bank, which means we have to take our legacy quite seriously, right? Because reputations can be ruined pretty quickly. It wouldn't take another 170 years. Plus we've got regulatory relationships, we've got licenses in many, many locations which we cannot put at risk because we think something is a good idea. Right? So some of these things have to be thought through. What has been different at our bank is from the very top, from a CEO, there has been support, VC, digitization, tokenization and generally blockchain and crypto as the future of financial services. So that is something we have support right from the top. Having said that, what differentiates banks from other fintechs or tech players is our view of regulation. Right? So for example, if in a certain location there is no regulation in a certain area, or for using cryptocurrencies or for using stablecoins for payments, a tech company or a fintech might say, hey, there is no regulation which says we cannot do this, which means we can do this. Unfortunately at banks we cannot take that view. We cannot say because there is no regulation, therefore we can do it. The view that banks usually take, including ours, is there needs to be a regulation that says what we can do and we can only do things within the said regulation. Right? So that is usually a point of friction for people trying to move a little bit forward and push the boundaries of what is possible today when people in my team are trying to do things and people in second line compliance and legal who are just trying to protect the bank and say no, no, there is no regulation for this yet, or the regulation is not clear or the interpretation of the regulation could mean something else and therefore you can't do it. So it's really pushing those boundaries. And the other part of it is of course regulators, their job is not necessary to do innovation. The job is of the private industry to innovate, to take things forward, to bring out new products. Their job is to protect their investors, clients in the ecosystem. So really it's about not just sitting back passively and saying, waiting for regulation to come, it's also engaging regulators quite actively, which can take a long time, but once it's there, it's actually there. And therefore we work actively with regulators, whether that's in the uk, whether it's here in the uae, Singapore, Hong Kong, to kind of bring these products to life. But yes, of course the frustration is there. We don't move as fast as the fintechs can and the technology companies can. But it fundamentally comes from this space where we're saying we can't do things until there is clear regulation there, whereas techs can take advantage of the fact that there is no regulation yet. And that is the fundamental difference.

Alex: For me, it sounds like regulation becomes quite a blocker for institutions like banks to make a move in this direction. So since you are actively implementing it, I guess something has changed in the recent years. Let's talk about regulation landscape. Can you share your experience with, with about what's been happening?

Parag: Yeah, and like I said, we don't necessarily, you know, when you mention it's a blocker, it can be, yes, but the idea is to not wait for regulation to happen and just sit back until that happens. The industry obviously always works very closely with regulators because of our legacy and because of our presence for, you know, hundreds of years in the markets that we operate in. We have very good relationships with our regulators and we work with them in helping them come up with new regulations. You know, behind the scenes, regulators are constantly issuing consultation papers to banks and other institutions to ask us how things should evolve, and we actively take a part there. Now, what has obviously happened over the last few years is, you know, a few things have happened that have actually accelerated the adoption of tokenization cryptocurrencies. Digital assets. First was when in the US they were allowed to issue Bitcoin ETFs, which now became crypto ETFs, Ethereum ETFs. That basically was a watershed moment because it showed the regulators and the restaurant industry that the demand for the underlying asset class was there. So people wanted the risk and return profile of a Bitcoin or Ethereum. It's just that the friction to get access to that asset class was very complicated. For you to get a wallet, you need to be able to buy Bitcoin somewhere. How do you do that? Can I trust these exchanges? Whereas an etf, if you think about it, is a crypto product and the code with a traditional or tradfi wrapper around it. And people always access products through the wrapper, through the access. Right? So a crypto ETF is essentially that crypto core and a wrapper of tradfi. If you look at tokenized money market funds or even stablecoin, it's actually the opposite. The core is stratified. The core is a deposit or cash or a U.S. treasury bill. And around that is a crypto rugby. So we think of these things differently, mirror images, but it depends on who you're trying to attract and who's trying to access the underlying asset. Coming to your question about regulations. So crypto ETFs began the journey and then of course last year the Genius act, right. And therefore 2025 became the stablecoin somewhat basically because the Genius act basically opened up and made clear what stablecoins can do, cannot do, how they should be set up. And stablecoins really became about fiat backed one is to one stable coins. There used to be other stablecoins and they still are, which are synthetic stablecoins, algorithmic stable coins, stablecoins backed by commodities, etc. Which still exist. Really what has taken precedence is stablecoins backed by fiat, which became a very important milestone. And then as recently as last week, or was it two weeks ago, the 30th of April, the FCA in the UK basically said you can now natively tokenize fucks. Now that is again a big movement because a lot of the work that banks were doing was really you have funds in a traditional form and then you have it in the legacy systems. You distribute them traditionally, but you just create a blockchain version of it or digital human, which, which is okay, but does not really unlock all of the benefits of, of tokenization. So now this new regulation allows you to natively tokenize funds, which means the blockchain can be the leisure, can be the system of record for these funds. You are allowed to use stablecoins as settlement against these funds. You can use public permissionless blockchains. You don't, you're not tied by private permission blockchains which are closed. So all of these things have moved regulation forward and therefore ability for serious institutions to offer these products to investors and clients. And we are on the 11th of May eagerly waiting for the 14th of May when the clarity Bill will get proposed to the Senate Banking Committee. And that should usher in a new wave of innovation and new products available, regulated products available for a lot of investors, consumers and clients. So I think we are in a very exciting space right now and this is really important that regulation comes in and lays the scope of what can and cannot be done. And it's great for the overall industry, not just banks. So when the day they said the Charity act will be now put forward to the Senate Banking Committee, Circle's share price jumped 16%. So it's not just banks and traditional financial institutions that will benefit from this crypto industry will also benefit hugely from some of these parak.

Alex: Let's talk about real life cases. If you can share those. I'm trying to understand the real cases that banks implementing using tokenization and real problems they trying to solve. Can you share that?

Parag: Yeah. The first, I suppose product market fit for tokenizing anything and we've seen the success, it's greater than 350 billion now is stablecoins. Stablecoins is nothing but money and money equivalent that has now been tokenized and put on the blockchain. To use my previous analogy of the crypto core and the TradFi wrapper, stablecoins is the opposite. There is a traditional core which is cash in banks and U.S. treasury bills and a crypto core. Sorry, and a crypto wrapper. Now why is a crypto wrapper necessary? Why does stablecoins first come into play is because people wanted to trade crypto, Bitcoin, Ethereum, other crypto assets and they wanted an on chain equivalent of fiat to retain stable value against fiat, but also for them to hold value when they trade in and out of positions. That is how stablecoin started. That was the first product market for it. Now people of course realize that when there is a store of value on the Internet and you can move that value around, you can now use it for other things, you can use it for payments. So that is what a lot of fintechs have done. And again just in the last few months we've seen a whole host of acquisitions that have happened, right? BBNK got acquired for 1.8 billion by a MasterCard. Coinbase acquired different company, Stripe acquired Bridge and so on. Just two days ago Kraken acquired reap. So that is, they seen a lot of adoption. And banks of course are sitting there and saying hey, we were the ones who used to do payments. Now this is all going there so we should start looking at this space. So that is one stablecoins. There are a lot of other real world assets that have been tokenized. But again the ones that have found product market fit have so far been money market funds issued by the likes of Franklin Templeton, Benji Blackrock, Bridle, Fidelity has introduced their own State street and so on. Now why have they performed product market fit again? Because of who is actually investing in these tokenized real world assets. Because if you forget about the source of capital then you will never find product market fit. If I just tokenize something for the sake of it and it does not actually solve a problem, then there's not going to be enough fracturing. So in the crypto world, people traders who were trading on exchanges, on venues had to place Collateral. Now they could either place cash as collateral or they could place other cryptocurrencies or stablecoins as collateral. But that meant they could not get any return on the collateral while it was just sitting there, you know, as, as a backup to the trading activity that they will perform. That is where they needed something that was on chain A, B, something that provided yield and three, something that could change ownership 24 by seven. And that is where money market funds came in and provided these three things. And the fourth thing that is now coming very closely already exists with some form of money market funds is 24 by 7 convertibility to stable coins as well. Right. So if you answer these four questions, that is what gives product market fit for tokenized money market funds to serve as collateral and for instance, collateral mobility 24,7.

Alex: Right.

Parag: So these are the two areas where stablecoins and tokenized money market funds where you've seen the highest adoption. Other asset classes are coming. But I'm very excited about this FCA regulation which came last week, which means other funds can come in and be natively used. So that is where I think is going to be the next stage of adoption for tokenized real world assets is going to be funds that can be tokenized. We are already seeing securities and we can talk about that as well because the way securities are coming on chain also there are some flavors to it. Some may be useful, some may not be as useful. But I'll stop there.

Alex: Right. So just to summarize, so right now we are at point where we have stablecoins, we have tokenized money market funds, we're looking at other money assets coming in shortly to be tokenized. What's next? Let's look out for, I don't know, a year or two. What do you think has the largest potential to be fully tokenized and why it's not happening and when do you think it will happen?

Parag: So the reason why things are not happening because people spoke about the operational efficiencies of putting, putting things on. Right? Oh, it's going to make things easier, it's going to make things cheaper. But the reality is that does not happen that easily. Right. So if you look at a, you know, you asked me about a bond value chain or any other security for that matter. So there are people who want to issue assets, I. E. They want to raise capital that could be in the form of debt, it could be the form of equity, it could be the form of trade, finance what it is. So there's just people who want to raise Money. And there's this other group of people that are the investors. What do investors want? They want a return on the capital and the higher the better. Of course. Of course they want to risk manage it. So they want diversity of risk. So Bitcoin was great because it was not correlated with some of the other asset classes completely. So diversification of risk and ideally a new risk return profile. So combination of both return of risk, that is what investors really want to. Whether something is tokenized or not is secondary. It does matter to the crypto native investors who already have the Web3 infrastructure and therefore if something is tokenized, it helps them enter. But really these two are the main players, people raising capital and the people wanting to invest in capital. There is a very long value chain in the traditional industry of people who are usually involved in issuance of a security or a bond, right? So there are custodians, there are csds, there are broker dealers, there are valuation agents, there are payment agents. They're just a long value chain. Now, all of these people actually make money from either of these two parties, either the people raising capital or the investors. Now, it's going to take a while for all of these to come on chain and agree on interoperability criteria, agree on standards, agree on frameworks. And that is why we haven't seen adoption at scale yet. And for them it's only a cost, right? So it's only when you provide a real risk return alternative to investors who will then push and say, okay, now I need things to be on chain because these are the benefits to me. And the rest of the value chain is really operational benefits only. Now to your question, which are the next assets that will come? So any of the assets today, the amount of time connections you should spend just on one single activity, and I'm oversimplifying, is called reconciliation, which is a security has been issued here, then it has been sold to someone else and they have sold it in the secondary market. Now it is sitting in custody somewhere else. Just managing that reconciliation is a huge waste of time and resources. What tokenization does is one token can be in only one wallet at a given point in time. So that eliminates this whole massive industry of reconsideration and operations, people and middle office people just shuffling paper and figuring out who owns what at any given point in time. Is this paid for, when was it paid, etc. All of that is basically simplified to token in a wallet. And that token in a wallet can be an asset that has been tokenized and on the Other side of the transaction will be a stablecoin or a tokenized money instrument, tokenized deposit CBDC to settle the transaction. So that will simplify things. And therefore before physical assets can be tokenized, and some of them already are being tokenized, I think various securities, whether that's bonds, equity funds, so on and so forth, are going to be the next that get tokenized simply because inefficiencies are just massive in the industry. And tokenization can solve for these problems provided by the entire value chain that I spoke of gets on chain and starts seeing the benefits. But before that they have to invest in some of these capabilities.

Alex: Barack, you are working currently in traditional financial institution at the same time you've been in crypto and web 3 for years. What I'm curious about, because most of people I spoke and speak to, they usually talk about crypto as something so innovative, so shiny and sometimes perfect that I keep asking this question to people who are actually working and have experience with traditional financial institutions. What crypto industry got wrong that traditional finance actually does bear in your opinion?

Parag: Yeah, and that is actually the irony of the whole situation. And we've got examples that have happened before in the crypto industry, Right. So we speak about decentralization, right. In the crypto industry, saying oh, decentralization. And that's great. And that's really why banks are bad and other financial institutions are bad, because they don't, they're centralized and crypto is decentralized. But actually, to be honest, the reverse is true. Right. So I spoke to you about the value chain, right. There's custodians, CSDs, broker dealers, payment agents. Why do they exist? These are regulated roles. Yes, there are intermediaries, but there is segregation of duties. A broker dealer cannot perform the same role as a custodian. A custodian cannot be a payment agent, and so on and so forth. There is segregation of duties so that there is no consolidation of power in a single entity. Now if you look at what happened with FTX and people trading, there it is. If I am a crypto trader, I had to place collateral where at ftx. Who decides the price of the of the crypto? It is FTX who decides when I need to settle to FTX and when FTX needs to settle to me, they are the settlement agent. They decide. They decide what time and how often they will settle with me. So there was massive centralization in the crypto industry which people did not realize. Yes, the technology is decentralized. Yes. No one can put bitcoin but if I'm trying to perform financial services on top of that, it was actually more centralized than anything we've seen in traditional finance. And that is actually an area where we see now a good combination of crypto insiders and tradify coming together and creating genuine products and offerings that actually break this over centralization, which was actually prevalent in the crypto industry until only a couple of years ago. So what we did in Standard Chartered is we have become a trusted custodian. So clients who wish to trade on an exchange like okx can actually place that collateral with us. We mirror this collateral onto the exchange so the crypto collateral never leaves us. And therefore the client is safe knowing that if tomorrow an exchange were to collapse, their money is not suddenly gone, it is still with us and we can give it back to them if the exchange collapses. And the same for the exchange, if the client collapses, goes bankrupt, we have the collateral with us and we can settle to the right market. Right. So there is, you might call it, an intermediary coming in. But actually that is bringing in genuine decentralization and that is where we see things going for institutional adoption of crypto trading, digital asset trading capital, which was actually missing from the crypto industry. And we've seen caused huge problems. And then the industry and the technology got a bad name. But it was really bad actors like FTX and some others who were actually over decentralized and had a lot of power over things.

Alex: I guess it's always about certain balance, how decentralized and centralized you want to be at the same time. And actually I have a question on that. So every major bank now is building their tokenization platform and it's just like, you know, in some time from now we'll end up with dozens of different systems and perhaps that cannot even talk to each other. How do you manage that? Or I'm getting it wrong?

Parag: No, so I think you're spot on. You know, there is this fear of missing out now within banks because everyone was very late to the digital assets and crypto party and now everyone feels that they just need to build a platform to do things. And to some extent, yes, you need to have the basics of a digital asset platform. You need to have border infrastructure because wallets are going to be the new bank accounts. You need ability to connect to the blockchain, you need to understand what's happening on the blockchain, but. And you need to also have ability to tokenize things that you are bringing to the table. But does everyone need to have a Tokenization platform. The answer is no, right? Because if you know, you used the example of bonds before now, bonds are an asset class where there are multiple parties that come together, right? So someone is issuing, someone wants to borrow money, but there are lots of investors. Now some of these investors also happen to be other banks. And traditionally banks never like to go to another bank's platform. Right, which is why many of these tokenization experiments have actually not really taken off beyond an experiment because no one wants to be shoehorned into each other's platform. So it's really a case for maybe some of these platforms for issuing bonds, distributing them and doing secondary trading is not actually an activity maybe for banks to perform, it should be done somewhere else. And now we've seen in the US DTCC trying to do things. So they are a financial market infrastructure, CSDs like Euroclear, Clearstream, maybe these are the right places that coolerization should happen and banks can participate. So banks should still have some blockchain infrastructure to connect to these platforms. But you're right, instead of having 47 different platforms, maybe we just need two or three big ones where there are network effects, where there is value that is added every time a new participant comes in instead of every participant in creating their own platform. And having tried to connect to each other bilaterally. So you're absolutely spot on. I don't think every bank should build their own tokenization platform. The right player in the value chain in the financial ecosystem should build the right platform and we should go from that. Of course there should be composability. So we want stablecoin issuers who issue stablecoins and perform their job. Someone else like csd, centralized securities depository like btcc, clearstreet, Euroclear can bring tokenization of bond and securities. And banks can play the role that they traditionally play, arranging deals, distributing deals, keeping assets in custody and so on. So I think there can be distribution, these platforms can connect, but you don't need a plethora of the same platform in every organization.

Alex: We talked about technological aspects, regulations aspects, the standards that this players are trying to establish and centralization, decentralization. I think another aspect that I'd like to throw into this bucket is the actual geography where you are working and implementing this. And since you're in Dubai, and I think it's probably most crypto friendly jurisdiction on the planet, I'm trying to understand if that gives you an advantage to other institutions that are dealing with US or EU regulations directly because they're physically there.

Parag: So yeah, I Mean, the UAE has definitely been great in terms of being very forward thinking in terms of regulation, but also attracting players in the industry to their shores. So to give an example of what we did here at Standard Chartered, when we first decided to launch digital asset custody, for example, the first jurisdiction we picked was the uae because, you know, the regulation. Not just that, the fact that there was some regulation here. The regulators were willing to listen to traditional industry and sort of bridge the gap between how they regulated the traditional industry and the tradition, traditional licensing regime was there and then combine that with the requirements of, of the new asset class, which is. Right, so that was, that was fantastic. Now the problem that we have with digital assets and where regulators have been scratching their heads is crypto. And digital assets is one of those rare asset classes which is global by nature. It is natively global. So Bitcoin does not sit in one place or the other. You cannot put a geographical boundary around it. It's not physical, like gold, where it sits in a vault in India or in London or somewhere else. And that is where the jurisdiction challenge is slightly different. But to your point, yes, the UAE took the lead, the US did not, until the new regime came in. Right. So after the latest administration came in that things have changed rapidly. And then Hong Kong and Singapore had always taken a forward looking view, but were a little bit conservative in some elements of crypto, which is slowly changing. And why is it changing? Because investors are demanding access to this asset class. Institutions, very large ones want to offer this to their investor clients and so things are changing. So has there been a head start for the UAE? 100% on other regulatory regimes catching up also true, at different pace, but it's coming. UK as I mentioned, you know, regulations were very different until a couple of years ago, but things are ramping up pretty quickly. Europe I would say, and on a relative basis, a little bit, I wouldn't say behind. But MICA has a very different way of regulating the industry compared to what we are seeing in the US or what we're seeing with the UK of late. And of course the UAE has been awesome. Multiple regulators here doing different things, but as a whole, very receptive to the industry, very encouraging of the industry while putting serious guard rates. And ultimately the industry, whether it's crypto or traditional finance, really wants those regulatory cordrays because that makes it safer and better for the industry to thrive than when there are no regulations five years from now.

Alex: What percentage of global financial assets are tokenized, in your opinion? Give me your actual prediction.

Parag: Yeah, Very hard to put a number on that. But we can maybe go asset class by asset class. Right. So we are in 2026. So five years is 2030, 2031. So we think, and it's not just me, generally including my colleagues in research, the bank thing, stablecoins, for example, will go from 300 billion to almost 2 trillion by 2030. Right. So that is a firm prediction. Some of the other asset classes, like tokenized deposits, other forms of money securities, will rise from very small today, 2530 billion, maybe to about 4 trillion by 2030.

Alex: Right.

Parag: So these are big numbers. Is it going to touch the 300 trillion of equities that we have and the 300 trillion or 200 trillion of debt that we have in the next five years? Are we going to make a big dent in that? The answer is no. I think it's still going to be in the high single digits to low double digits. But that's where we are likely to get in the next five years. But that will still be huge. And when people see the benefits that tokenization has, you know, just like I mentioned, everything from reconciliation to operational efficiencies, but just new products and new asset classes that come up. Because when you tokenize things, put them on chain, the composability of Web3 means you can create new products from existing ones. Then you know, you just see this parabolic effect of things starting slow but then suddenly accelerating. And you know, something going 10x is not a smart prediction. So. So we are at a very low base, relatively speaking. But then stablecoins are a new form of money that didn't exist five years ago. From there to go to 2 trillion is already a massive, massive beat.

Alex: Last question I have. You've been building the future of finance for years. What's the one thing about the current financial system that you're secretly going to miss when it's all tokenized?

Parag: Well, I suppose there is tokenization, there is artificial intelligence which is coming into play. What we are going to miss is probably the way we do things and the way we build products. Right? Because with all of the composability, all of the automated nature of building products, I think human element of coming together, whiteboarding things, sitting in meetings, drawing out new solutions. I hope it doesn't disappear. But we can already see because of the natural remote nature of working, you work remotely. You're based in a nice digital nomad location. I am based here. My team is spread out across multiple locations. That is already changing. And that's just going to accelerate the way we come together to create new products, to create financial services and offer these to our clients. Is that a bad thing to happen? Maybe not. But I suppose just nostalgia, the old wing of doing things. We just could remember those and hopefully fondly at how things have been done so far.

Alex: Yeah, I totally agree on that one. Barak, thank you very much for your time. That's been a great conversation.

Parag: Thank you, Alex. It was a pleasure being here.

Alex: Thanks for the listeners still listening. And don't forget to hit the like button on YouTube, subscribe to the channel, or leave a review at the podcast platform that you're listening this at and see you in the next episodes.

Parag: Bye Bye.