From Sandbox to Scale: DLT’s Institutional Moment

Global trends: institutionalising DLT

The momentum in financial infrastructure is evident. A major study from the International Organization of Securities Commissions (IOSCO) found that the tokenisation of financial assets via DLT is growing but still nascent, with interoperability and settlement‑asset challenges ahead.

Reinforcing this shift, the Bank of England recently published a strategy paper emphasising that DLT — alongside AI and quantum computing — is one of the “cross‑cutting technologies” with potential to reshape the UK economy.

What this signals: the question is shifting from whether to how fast and how broadly DLT will integrate into mainstream financial infrastructure.

New use‑cases across sectors

One of the most visible stories this week: Morgan Stanley has integrated iCapital’s DLT solution for its alternative investments business — boosting onboarding, automating reconciliation and execution, reducing the manual overhead.

Separately, HSBC announced plans to expand its “tokenised deposits” service (a DLT‑based bank deposit representation) to U.S. and UAE corporate clients next year. These use‑cases illustrate two dimensions: (1) DLT bolting into big‑ticket financial infrastructure; (2) rapid expansion of business‑model applications beyond just the “crypto story”.

Legislative & regulatory updates

Regulation is intensifying. In the UK, the Financial Conduct Authority (FCA) published consultation proposals on “tokenised authorised funds” (tokenised units within existing regulated funds) — including allowing on‑chain registers and automatic smart‑contract‑based flow of units.

At the international level, the IOSCO report reviewed how regulators are approaching tokenisation of financial assets and emphasised that risks (legal, operational, cyber) remain significant. For business leaders, this means two trade‑offs: the upside of innovation is real; but building for the “new DLT‑normal” means factoring in regulatory design as part of your technology strategy.

Fraud & myth‑debunking

While this isn’t purely about DLT, the broader theme is relevant: open financial networks invite fraud — so infrastructure alone is not a panacea. A U.S. federal jury last week convicted a man of orchestrating a $14 million crypto‑asset fraud scheme involving misleading claims and artificial trading bots.

In parallel, academic research shows that while DLT may improve transparency in supply chains, it does not automatically eliminate counter‑party risk or system fragmentation. The takeaway: part of the promise of ledger‑based systems is enhanced transparency and auditability — but the reality is that infrastructure alone doesn’t eliminate fraud risk. Controls, governance and data integrity remain essential.

Societal applications & positive spin

DLT is not just about finance. Its potential societal benefits are advancing: for example, research shows that in supply‑chain contexts DLT can enhance traceability, reduce manual reconciliation, and improve accountability.

Also, the enlarging interest by regulators (see BoE and IOSCO) in frameworks for tokenisation signals that DLT deployments are increasingly expected to deliver broader economic and social utility — not just headline‑grabbing proofs of concept. By bridging finance, infrastructure, and real‑economy uses, DLT is starting to play a role in enabling new business models, friction‑reduced market entry and more inclusive asset‑access models.