Consensus 2025

The convergence of traditional finance and blockchain

Rishabh Das
May 15, 2025

The Great Convergence

Consensus 2025 was all about the convergence of traditional finance and blockchain. For years, crypto and TradFi developed along parallel paths: crypto enthusiasts built decentralized systems that prioritized openness and programmability while banks and asset managers experimented cautiously with private, permission-based networks. Today, these paths are converging. Major financial institutions like JPMorgan and DTCC are embracing public blockchains, while crypto companies are embracing regulatory clarity as a way to unlock growth.

This article quotes from many of the Consensus 2025 panel discussions and answers four questions:

What is Convergence? - What does convergence between institutional finance and public blockchains look like?
So What? - Why does this matter and what opportunities does it create?
Why Now? - What factors have aligned to make this the moment for institutional blockchain adoption?
What Now? - What should you do about it as an operator?

Disclaimer: The views and opinions expressed are solely those of the author and do not necessarily reflect those of the author's current employer. This material is for informational purposes only and is not intended to provide legal, tax, financial, or investment advice. Recipients should consult their own advisors before making these types of decisions. The author is not responsible for errors, inaccuracies, or omissions of information; nor for the accuracy or authenticity of the information upon which it relies.

What is Convergence?

The convergence between institutional finance and public blockchains is manifesting across several key dimensions:

Public-Private Blockchain Integration: Public blockchains face a fundamental contradiction: while transparency ensures trustless verification, it creates significant privacy concerns for users. For example, every transaction detail—sender, receiver, amount, and timestamp—is fully visible to anyone. This is changing with privacy-enabled technologies (like zero-knowledge proofs) for blockchains. As Howard Wu (CEO of Provable and co-creator of Aleo) noted, "The difference between permissioned and permissionless chains is actually getting a lot smaller," with institutions like JPMorgan now executing transactions on public blockchains while embedding privacy and regulatory controls at the token or smart contract level (see point #3 below).
Tokenized Real-World Assets: I see substantial momentum in bringing traditional financial assets on-chain. According to Sergey Nazarov, the blockchain technical stack consists of three distinct but complimentary layers with different players occupying specific positions:
1. Low-level protocols layer (bottom): This is where Chainlink and L1/L2 blockchains operate, providing the foundational technical standards similar to "TCP/IP and HTTPS and SSL" in the internet. Layer 1 blockchains provide the base consensus and security layer, Layer 2 solutions scale transaction throughput while inheriting security from L1s, and oracle networks like Chainlink serve as the cross-chain communication protocols that connect these systems to each other and to external data sources. This foundational layer creates the infrastructure that enables standardized transactions and financial applications to be built above it.
2. Transaction standards layer (middle): This is where DTCC fits in, defining "standardized formats for transactions" and establishing "how transactions should operate." They create the frameworks for "how transactions properly get formed, how they work, how you define value, how you represent that in various different data structures."
3. Financial services layer (top): This is where JPMorgan and other financial institutions operate, building on the lower layers to deliver actual financial products. These institutions leverage the standards and protocols to create value for end users. For example, JPMorgan is processing nearly $2 trillion a year through blockchain rails and is using Chainlink to bridge assets to public blockchains. Companies like Ondo Finance and Superstate are also evaluating ways to tokenize securities directly on-chain (instead of tokenizing “fund wrappers”).
This layered model shows how each entity plays a complementary role rather than a competitive one (similar to how the internet evolved with different players providing infrastructure, standards, and applications).
Embedded Compliance: Rather than viewing compliance as incompatible with blockchain's openness, the industry is developing token standards that embed regulatory controls (like KYC/AML) directly into smart contract. Examples include ERC-3643 and Solana's Token-22 standards that build KYC/AML checks into tokens themselves, Chainlink's proof-of-reserve systems that verify asset backing, and Aleo's zero-knowledge compliance that enables verification without exposing sensitive data. These approaches maintain blockchain's open architecture while satisfying regulatory requirements, allowing institutions to participate in public networks without compromising their compliance obligations. This has unlocked new ways to balance innovation with market integrity.
Regulatory Engagement: Industry leaders are actively engaging with leaders in Washington DC to develop appropriate regulatory frameworks, reflecting a shift from being adversarial to "actively seeking regulation."

This is a fundamental reimagining of financial infrastructure that preserves the transparency, programmability, and efficiency of blockchain while addressing the security, resilience, compliance, and stability requirements of traditional finance.

So What?

This convergence creates a transformative opportunity:

Capital Efficiency, Composability, and Privacy: The elimination of settlement delays, intermediary costs, and fragmented liquidity pools could unlock trillions in capital efficiency gains. As Dan Doney of DTCC highlighted, the current system's inefficiencies cost banks "hundreds of millions of dollars a day" during peak market volatility cycles due to locked up collateral. Real-time settlement through blockchain infrastructure directly addresses this pain point.
Banks like JPM sees several advantages in public blockchains, including:
- Lower barriers to entry and reduced operational overhead
  - Notably, JPMorgan announced during the conference their first transaction connecting their permissioned ecosystem with a public blockchain. As Keerthi Modgal (JPM Kinexys) described, they demonstrated how a user who wanted to purchase OUSG [Ondo's tokenized U.S. Treasury fund] could do so with fiat cash from JPM Kinexys and bridge it to Ondo Chain (L1 blockchain) using Chainlink's CCIP interoperability protocol. This represents a significant step toward bridging traditional finance with public blockchain ecosystems.
- Modularity and composability
  - The ability to combine different financial primitives in novel ways through smart contracts creates what Alexandra Prager of JPMorgan described as the opportunity for "clients to very rapidly build up new trading structures, new structured products, hyper-customized portfolios, all within an instant.”
- Privacy
  - Privacy on-chain is evolving through technologies like zero-knowledge proofs that allow transaction verification without revealing sensitive details. Examples include Aleo's platform enabling confidential smart contracts with verifiable compliance, Chainlink's CCIP protocol that preserves transaction privacy across networks, and JPMorgan's implementation of shielded transfers on their permissioned blockchains with plans to extend similar capabilities to public blockchain interactions.
Democratized Financial Services: As institutional-grade financial services migrate to blockchain infrastructure, they become accessible to broader audiences. As Dan Doney (DTCC) noted, "There will be a day when there is no distinction between institutional and retail, they're all part of the same fabric" potentially expanding access to sophisticated financial products beyond traditional gatekeepers.
Global Competition: Sergey Nazarov (Chainlink) highlighted how standards-based blockchain infrastructure leads to "a different level of global competition to make better financial products" potentially driving rapid improvement in financial services quality and accessibility. This standardization allows smaller players to compete with established institutions by building on shared infrastructure, ultimately benefiting end users through improved product quality, lower costs, and previously impossible financial capabilities like programmable and automated settlement.
Strategic Currency Competition: The US increasingly recognizes blockchain infrastructure as a vector for reserve currency influence, with Treasury Secretary Scott Bessent embracing stablecoins as a means to "advance the cause of the U.S. dollar" globally.

The scale of this opportunity is reflected in the institutional capital now engaging with blockchain infrastructure. BlackRock, Fidelity, JPMorgan, T. Rowe Price, DTCC, and other financial giants are deploying significant capital and infrastructure on-chain. This isn't speculative interest but strategic positioning for what they see as the future of financial infrastructure.

Why Now?

Several catalysts have converged to create an inflection point for institutional blockchain adoption:

Technological Maturity: Privacy-preserving cryptography, interoperability protocols, and scalable blockchain networks have reached sufficient maturity to address institutional requirements. As Howard Wu explained, the evolution parallels how "TLS came about and HTTPS became the common default" for internet security, enabling sensitive transactions.
Regulatory Clarity Emergence: We're seeing what Blue Macellari of T. Rowe Price called "a level of technological understanding from regulators, focused on providing clarity that hasn't existed before." The White House Crypto Summit and bipartisan congressional efforts on stablecoin legislation signal this shift.
Market Structure Proof Points: The trillions already processed on blockchain networks and the success of tokenized funds (like Blackrock’s BUIDL tokenized treasury fund) demonstrate the technology's viability and benefits, creating confidence for broader adoption on public chains.
Geopolitical Competition: As countries race to establish digital currency leadership, institutions and governments face pressure to engage with the crypto industry or risk being left behind.

The convergence of these factors has created what Sergey Nazarov called a "perfect window in time" for transformative change – a moment when technological capability, regulatory openness, and market demand have aligned to enable institutional blockchain adoption at scale.

What Now?

For companies building in this ecosystem, the panelists recommended the following:

Invest in Interoperability and Standards: The future belongs to interoperable networks that enable seamless value transfer and composability. Technical standards for cross-chain transactions, privacy-preserving computation, and on-chain compliance will be particularly valuable.
Bridge Institutional and Crypto-Native Expertise: Teams that combine deep understanding of traditional financial infrastructure with blockchain development expertise will have a significant advantage. As Alexandra Prager from JPM noted, “we need those who can think about the system as a whole and not just what may happen on one blockchain."
Focus on Tokenization: The current “hybrid tokenization” system where you tokenize fund shares via an SPV but settle the assets via the traditional system is unsustainable. The most immediate high-value opportunity lies in settlement infrastructure that can eliminate the "intertemporal asset liability mismatch" Blue Macellari identified between instant blockchain settlement and traditional T+1 processes. In other words, the assets themselves (e.g. stocks) need to be tokenized and not just the “fund wrappers” (e.g. the ETF or SPV shares).
This requires:
1. Regulatory frameworks for issuing securities directly on blockchain
2. Market infrastructure to support primary issuance of assets on-chain
3. Legal ownership of blockchain-based records
Develop Embedded Compliance Solutions: Solutions that embed compliance at the token or smart contract level will enable institutions to participate in public blockchain ecosystems while maintaining regulatory compliance. One example of this is "permissioned DeFi pools that are composable with the broader DeFi universe"
Engage Proactively with Regulators: Industry participants should follow the approach of “actively engaging with regulation” rather than avoiding it, helping shape frameworks that enable innovation while addressing legitimate concerns.

As an industry, we are reimagining financial infrastructure from first principles, preserving what works from TradFi and improving what doesn't. I am incredibly grateful to the panelists and excited for Day 2 of the conference!