Fragmented Standards Restrict Scale
Tokenized funds, securities, and cash instruments have moved beyond technical demonstrations, but differences among Layer 1 blockchains, interoperability systems, and permissioned and permissionless networks continue to limit scale. Franklin Templeton (NYSE: BEN), which reported assets under management of $1.78 trillion as of May 31, 2026, is among the major asset managers developing blockchain-based investment products.
In an exclusive interview with Bitcoin.com News, Franklin Templeton executive Chetan Karkhanis, who leads digital asset partnerships in Asia-Pacific, described the technical challenge facing the sector:
“From a technology standpoint, the biggest challenge is probably ubiquity of standards with the product set.”
Assets and payments often operate across separate networks, while settlement may involve stablecoins, tokenized bank deposits, or central bank digital currencies (CBDCs) governed by different systems. “Even simple tokenized cash products lack common rails of convergence,” Karkhanis noted.
The Bank for International Settlements (BIS) has outlined how interoperable networks connecting tokenized assets with central bank reserves and commercial bank money could reduce reconciliation, support simultaneous settlement, and enable programmable transactions. Without common infrastructure, however, those benefits may remain confined to individual platforms.
Regulation and Distribution Limit Adoption
Beyond technology, inconsistent cross-border rules determine where products may be sold, who can own them, and how custody and settlement are treated. Karkhanis pointed to a broader set of constraints:
“The larger challenges are likely regulatory clarity across borders and really awareness, adoption and education – which could lead to greater adoption of tokenized RWA if done right.”
The November 2025 tokenization report from the International Organization of Securities Commissions (IOSCO) similarly identified regulatory treatment, interoperability, settlement arrangements, and operational dependencies as persistent barriers. Greater coordination could expand capital pools, while continued fragmentation may restrict products to selected jurisdictions and blockchain ecosystems.
Established banks, brokerages, advisers, and fund platforms already provide custody, reporting, and access to retail and institutional capital, while many traditional distribution platforms are still experimenting with proofs of concept (POCs) rather than commercial deployments at scale.
“Traditional distribution platforms are not all there yet. Some are experimenting and launching POCs but not at scale commercial deployments,” the Franklin Templeton executive remarked. “The technology exists, but liquidity in tokenized RWA and issuance is minuscule compared to traditional assets.”
Traditional and Digital Channels Could Converge
Rather than displacing existing finance, tokenization may extend it through traditional accounts, exchanges, wallets, and blockchain applications. Karkhanis said:
“I believe there will be a diversity of offerings – both incumbents and DeFi next gen players will have an opportunity to participate.”
Incumbents retain most investor relationships and assets, while decentralized finance platforms could attract newer generations of investors and their asset flows. Competition will likely depend on accessibility, product selection, regulated custody, consolidated reporting and settlement efficiency rather than blockchain infrastructure alone.
Familiar products, including tokenized stocks, bonds, and exchange-traded funds, may offer the clearest route to broader distribution because investors already understand their risks and returns. Tokenization could deliver its greatest value in markets involving complex ownership, restricted access, or frequent collateral movement.
Portfolio Use Will Define Success
Karkhanis believes “the main role asset managers like us can play at the current juncture is education and awareness building, and product appeal.”
Mainstream investors will continue to evaluate returns, risks, costs, liquidity, and suitability rather than the technology recording ownership. Franklin Templeton’s Onchain U.S. Government Money Fund illustrates that model by combining a regulated, U.S.-registered money market fund with blockchain-based record-keeping and administration.
Looking five years ahead, the executive expects blockchain infrastructure to fade into the background, with investors benefiting from tokenized products without needing to understand the underlying technology, much like they use mobile phones and smart devices today. Ultimately, adoption will depend on meaningful asset growth, wider investor participation, and sustained secondary market liquidity. He framed success in practical terms:
“Simplifying that experience and making it seamless will ensure greater adoption and success will really be measured by the level of asset growth and investor adoption.”
