The infrastructure that underpins global capital markets settles over $10 trillion in transactions every day.
It does so slowly, expensively, and across a web of fragmented systems that were never designed for the markets they now support. Post-trade processes alone account for up to 30–40% of total transaction costs in some asset classes. That is not a technology problem waiting to be solved. It is a structural cost that institutions have simply learned to absorb.
That is starting to change. Not because the technology is new, but because the conditions for institutional adoption at scale have finally converged.
Why tokenisation alone is not enough
Tokenisation has attracted significant attention as a solution to settlement friction. The logic is sound: if assets exist on a shared ledger, settlement can be faster, ownership more transparent, and operational duplication reduced. But institutions that have launched tokenisation initiatives in isolation have often found that adoption stalls. Assets existed on-chain; liquidity did not.
Cash settlement remained off-chain. The surrounding ecosystem was incomplete.
"Tokenisation on its own does not remove friction. The real unlock happens when cash moves on-chain as well, so assets and payments can settle together instead of bridging two systems."
Angie Walker, Commercial Head of Apex Digital
The shift that changes this is twofold. First, cash needs to move on-chain, enabling atomic settlement, where delivery and payment occur simultaneously rather than across a two-to-five-day cycle. Second, collateral needs to become mobile, so that institutions can access liquidity by financing existing positions rather than redeeming them. Together, these capabilities shift the operating model from redemption-driven to collateral-driven liquidity management.
The economic impact is measurable. Settlement drag that currently translates into 10–30 basis points of annual performance leakage can be compressed to seconds. Capital previously idle during settlement cycles is redeployed. Reconciliation and exception-handling costs decline as shared ledgers replace duplicated record-keeping.
The infrastructure required
Institutional adoption does not emerge from a single protocol. It requires an end-to-end architecture that integrates compliant asset issuance, cash on-chain, and productive liquidity from the outset.
We provide the institutional operating and compliance layer. Through compliance-native tokenisation, eligibility rules, transfer restrictions, and investor classifications are enforced at the asset level rather than applied as an afterthought. This preserves regulatory integrity while reducing friction across the servicing and administration chain.
Aave Labs provides the on-chain liquidity and risk layer. Aave Horizon is designed to support tokenised real-world assets as collateral within a controlled, permissioned environment, allowing institutions to borrow stablecoins against holdings rather than redeeming. As of 2025, Horizon has grown to over $570 million in net assets, supporting tokenised treasury and fund products from a range of established issuers.
Together, this architecture illustrates how institutional DeFi moves from concept to production-ready operating model.
Why the timing is right
Regulatory clarity has played a significant role in making institutional engagement viable. The EU's Markets in Crypto-Assets Regulation (“MiCA”) provides a function-based framework for a pan-European market that institutions can design around with confidence. Globally, the direction is consistent, with regulators increasingly framing the risks of on-chain finance as familiar risks expressed through new technology rather than an entirely new category.
At the same time, structural demand is building. Estimates from Citi and Cerulli suggest between $84 trillion and $124 trillion of wealth will transfer to younger generations over the coming decades. These investors expect digital access, transparency, and exposure to private and alternative assets. Existing operating models are most constrained precisely where demand is growing fastest.
The question for institutions has shifted from whether on-chain finance is permitted to how it should be designed and governed.
Read the full analysis
Developed jointly with Aave Labs, our new eBook sets out what a credible institutional DeFi stack looks like in practice, including a case study of a minimum viable ecosystem in operation and a practical checklist for institutions considering adoption.
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Institutional decentralised finance at an inflection point
