JPMorgan: $25B Tokenization Stalled Amid Regulatory Gaps

- Limited institutional adoption amid regulatory, legal, and operational barriers. - Minimal secondary market activity and utility for tokenized assets. On August 7, 2025, The Block reported on a JPMorgan analysis stating that growth in decentralized finance (DeFi) and tokenization faces significant challenges from regulatory barriers and a lack of institutional interest. The report, led by managing director Nikolaos Panigirtzoglou, outlines these key obstacles and highlights a lack of perceived value among traditional investors. The analysis detailed several challenges, including a lack of harmonized cross-border regulations and insufficient legal clarity for on-chain investments. In addition, JPMorgan's analysts noted concerns about the enforceability of smart contracts and protocol security. These issues have prevented institutional participants from driving significant activity in DeFi, leaving the space dominated by retail investors and crypto-native firms. As a result, the total value locked (TVL) in DeFi has yet to recover to its 2021 peak. JPMorgan's report highlights stagnation in asset tokenization despite the industry's "hype," with the total value of tokenized assets currently at approximately $25 billion. While crypto-native firms and hedge funds drive most of this activity, high-profile examples like tokenized bonds and private credit have struggled to gain traction. Issuers have launched more than 60 tokenized bonds worth a combined $8 billion, yet these assets see minimal or no secondary trading, which makes them “rather experimental.” Similarly, a few select players hold the reported $15 billion in tokenized private credit, resulting in limited liquidity and market depth. The analysts argue that traditional investors do not see a strong need for tokenization, pointing to advancements in financial technology outside of blockchain that already offer faster and cheaper settlements, which reduces the necessity for on-chain systems. Furthermore, blockchain's transparency can deter institutional investors, who often prioritize confidentiality and use "dark pools" to protect their trading strategies. Although JPMorgan continues to advance blockchain adoption through its Kinexys unit, which develops digital payment solutions and tokenized assets, broader institutional uptake remains slow. The report concludes that regulatory challenges, legal ambiguity, and traditional market dynamics have contributed to the slow progress of both DeFi and tokenization initiatives. According to CoinMarketCap, as of 13:00 UTC on August 7, Ethereum (ETH) was trading at $1,843, with a 1.7% increase in 24-hour trading volume.