Capco managing principal Dejan Knezevic shares his insights with WP
Tokenization of assets is rapidly moving from theory to execution across Canadian financial services, prompting banks, asset managers and pension funds to reassess what “readiness” really means.
As institutions move beyond pilots and begin building real platforms and products, many are discovering that operational, technology and governance questions are just as significant as the strategic opportunity.
Dejan Knezevic, managing principal at Capco, tells WP that interest has accelerated because several structural and market-driven forces are converging.
“From Capco’s perspective, several factors have converged in recent years to drive the sharp increase in interest in tokenization,” Knezevic says. “Over this period, the Canadian market has seen a number of important initiatives, including compressed market settlement with the transition T+1, as well as access to liquid alternatives, in the form of hedge funds. At the same time, demand for increased liquidity and broader market access has continued to grow.”
He adds that tokenization is increasingly viewed as a natural evolution of financial markets.
“Institutions understand that tokenization can potentially improve liquidity and market access to a broader investor base and ‘democratize’, for the lack of a better term, assets such as real estate, private equity, infrastructure and private credit,” Knezevic says. “In a nutshell, on the listed securities side key factors are potential enhanced liquidity on listed securities and 24/7 global trading reach via digital trading platforms.”
He also points to efficiency gains across the post-trade lifecycle.
“Securities processing is still fragmented across trading, settlements, and servicing resulting in delays, failures, and operational constraints and costs. Distributed Ledger Technology (DLT) is increasingly viewed to streamline the lifecycle and blockchain based settlement elevates operational efficiency to a new level,” he says. “Hence, potential for accelerated or atomic settlement for certain asset classes, fractional ownership, 24 / 7 markets and lower operational costs are all very appealing to institutions.”
How tokenization changes issuance and asset management
As firms explore practical implementation, tokenization has implications for how assets are issued, recorded and serviced.
“In the tokenized world, the assets can be fractionally represented as a digital token on a blockchain. The asset ownership would be recorded on a shared ledger,” Knezevic says. “The wider Canadian industry is still in early-stage pilots and design discussions, but there would need to be active decisions on who would manage the governance, network-type, and interoperability of the blockchain and whether the blockchain would be open or closed.”
He notes that smart contracts could significantly reshape traditional workflows.
“This would also lead to an issuance of smart contracts which would expedite automation of issuance terms as well as potential for faster or atomic settlement. Smart contracts can automate business/operations and financial instrument logic (e.g., transfers, restrictions, servicing events) so select operational steps become executable controls rather than manual procedures,” he explains.
Among the most important differentiators is the move towards a unified data environment.
“Key differentiators include a shared, synchronized record of ownership and transactions — serving as a single source of truth — on a distributed ledger or blockchain; reduced reconciliation compared with traditional processes involving custodians and clearinghouses; and embedded compliance rules and corporate actions executed through smart contracts,” Knezevic says.
Operational shifts and new resilience demands
Moving from proof-of-concept to scaled deployment requires fundamental operating model changes, particularly as institutions confront the implications of real-time markets.
“As a consequence of tokenization becoming a reality, there will be some key operational adjustments required. Legacy banking and trading infrastructures were built for limited daily windows, raising the question of how their purpose will change and adapt,” Knezevic says.
“True 24/7 availability or hybrid models will demand high-availability architecture, active setups, and disaster recovery models designed for high-availability and resiliency targets aligned to criticality, rather than depending on overnight resets.”
He adds that continuous processing introduces new pressures across the organisation.
“This shift fundamentally challenges how institutions think about operational resilience and risk management,” Knezevic says. “At the same time, traditional maintenance windows would become more limited, and weekend upgrades and batch releases would have to give way to live system updates, automated testing and continuous deployment models.”
“Real-time settlement and reconciliation further amplify the pressure. Processes once executed overnight would now run continuously, stressing back-office systems, custody ledgers and token issuance platforms.”
To address this, he argues, automation and advanced analytics will be essential.
“Without automation and AI-driven exception management, operational scalability will be limited. Continuous price feeds and token updates introduce another layer of complexity. Synchronizing high-frequency data across blockchains, custodians, and venues exceeds the capabilities of most legacy core systems,” Knezevic says. “AI-enabled data orchestration and anomaly detection become critical to maintain accuracy and trust.”
Ultimately, he believes firms must rethink core structures.
“In a nutshell, significant operating model uplift will be required, both from an industry and organizational stakeholders perspective. Firms will need to re-imagine their operating models, redefining ownership, oversight, control functions, roles and responsibilities, as well as process flows and technology integration.”
Where smart contracts deliver value — and where readiness is lagging
While smart contracts are often highlighted as a core advantage of tokenization, institutions are still assessing where they create immediate value.
“A key benefit is reducing manual processes and enabling workflow automation across parts of the settlement lifecycle in traditional settlement markets,” Knezevic says. “Automation of settlement instructions and lifecycle events — subject to regulatory and liquidity constraints — along with reduced manual interventions and operational errors, are key benefits.”
He also points to potential improvements in risk and capital efficiency.
“Since smart contracts can enable atomic delivery-versus-payment (DvP), where supported by infrastructure, reducing counterparty risk and improving liquidity and capital efficiency,” he says. “Smart contracts can automate certain functions performed by transfer agents, custodians, and clearing entities, while regulated intermediaries continue to play governance, custody, and oversight roles and lower transaction costs and minimize reconciliation.”
However, the pace of adoption is shaped by broader industry priorities.
“Institutions are not necessarily cautious, but they have a lot on the go: new products, disruption and integration of AI into their daily operations, uncertain macroeconomic and geopolitical situations,” Knezevic says. “On top of that, underlying infrastructure needs to support smart contracts and the institutions are simply not there yet.”
Technology readiness gaps remain global
Many of the readiness challenges Canadian firms face are shared internationally, particularly around legacy systems and digital infrastructure.
“Readiness gaps, or should we call them challenges, are not a Canadian specific issue, but a global challenge,” Knezevic says. “System / IT challenges will require banks to reorganize human activity and intensively adopt AI. High availability, scalability, automation, continuous monitoring and management of new pricing mechanisms can only be solved with a cloud-based / AI driven banking platform.”
He highlights integration complexity as a key hurdle.
“From an operational readiness perspective, Capco highlights several key considerations, including integration points with the existing tech stack, the design of the target-state architecture, and hybrid architectures that integrate on-premise core systems with cloud-based digital asset platforms,” he says.
Institutions must also address infrastructure capacity and custody considerations.
“Market participants also may not have enough computing power to support this at the moment and would need to consider how to upscale GPU / processing power to enable AI at scale,” Knezevic says. “Key Management Software (KMS) is a key component enabling the financial institution to provide crypto custody services by managing wallets and safeguarding cryptographic keys.”
He adds that firms will need new connectivity layers across systems and markets.
“Institutions need integration layers to connect custody platforms, tokenization platforms, and existing middle/back-office systems for accounting, reporting, and reconciliation,” Knezevic explains. “These layers must also support integration between KMS, trading venues, and legacy systems, ensuring orchestration of individual components and providing data streams to middle & back-office systems for accounting and reporting.”
Innovation versus regulation
Firms are also balancing innovation ambitions with regulatory uncertainty, particularly as frameworks continue to evolve.
“A number of firms are looking into use cases and some into proof of concepts. However, until the regulatory and legal landscape is clearly mandated that innovation will be limited,” Knezevic says.
He notes that global exposure could accelerate adoption.
“What is interesting is what will occur in other global markets, hence global Canadian players that have trading desks in London, New York, Singapore and Hong Kong may be spurred on to innovate faster due to their global reach.”
At the same time, domestic developments are beginning to shape momentum.
“As we see these types of steps being taken in the market, this will drive further innovation by market participants,” Knezevic says, pointing to initiatives such as a planned regulated Canadian-dollar stablecoin and ongoing guidance from regulators.
What will separate leaders from laggards
Looking ahead three to five years, Knezevic believes success will depend on how comprehensively institutions prepare across the organisation.
“Consider impacts of security tokenization on your organization from a people, process, technology, data, governance, compliance and legal perspectives. This entails involving the appropriate stakeholders,” he says.
Integration with existing operations will be critical.
“How well firms integrate with their existing operations is very important. Similar to any large-scale transformation, adopting change in silo is not sustainable nor effective for long-term transformation.”
He emphasises the importance of experimentation and strategic planning.
“Consider development of a proof of concept and develop a plan to anticipate / be prepared for evolving market change on time,” Knezevic says. “Tokenization of global assets is estimated to be a $16 Trillion business opportunity by 2030, which will be around 11% of the total global AUM.”
“However, with the right talent, developing proof of concepts is crucial and the firms that continue to develop these POCs and understand what they will require will be ahead of peers.”
