When BlackRock, the world’s largest asset manager, saw its $2.9 billion tokenized U.S. Treasury fund accepted as collateral on major exchanges, Crypto.com and Deribit, it marked a milestone: Real-world assets had officially entered the crypto mainstream.
But beneath the surface, the structure of that fund reveals the limits of public blockchain infrastructure. Despite being issued on the public blockchain Ethereum, the fund, known as BUIDL, handles KYC (know your customer) verification entirely off-chain via another company, Securitize, and custody is managed by BNY Mellon. This reintroduces the very centralization crypto was supposed to avoid. Worse, Ethereum’s probabilistic settlement means transactions can’t be finalized instantly. These compromises aren’t just philosophical, they pose real operational risks that regulated institutions cannot afford to ignore.
The situation is reminiscent of cloud computing’s early years. Banks and large enterprises found the idea compelling, but adoption was slow until the infrastructure matured to support strict compliance, auditability and control. Public blockchains today face a similar gap: They weren’t designed to meet the high-stakes demands of institutional finance, and it shows.
From BlackRock and Citi to Franklin Templeton and JPMorgan, major financial players are experimenting aggressively with tokenized RWAs, traditional assets like government bonds represented on blockchains. The market has grown from $100 million in early 2023 to more than $7.3 billion by mid-2025, with Ethereum capturing 78 percent of the total value. MakerDAO, for instance, has integrated RWAs by partnering with institutional lenders. These examples point to a clear convergence between TradFi and crypto but also highlight how current infrastructure remains out of step with institutional needs.
Photo by Eamonn M. McCormack/Getty Images for London Blockchain Conference
Leading Blockchains Can’t Meet Institutional Standards
The most popular and well-known blockchains, such as Ethereum and Solana, are public general-purpose chains designed for permissionless innovation and decentralization—not for compliance, auditability or integration with legacy finance. That design philosophy creates friction on multiple fronts.
Settlement is one major issue. Public chains like Ethereum offer probabilistic finality, meaning transactions can technically be reversed or reorganized for a short window. In regulated markets, that kind of ambiguity is unacceptable. Financial institutions need instant, irreversible settlement to meet legal and operational standards.
Compliance is another sticking point. Institutions need to know who they’re interacting with, enforce KYC and anti-money-laundering policies, and log activity in ways that satisfy auditors and regulators. While experiments like JPMorgan’s Polygon fork show this can be done on-chain, doing so typically requires private forks, custom contracts or third-party tools. Public chains don’t offer these features natively, making compliance expensive and fragile.
Fee structures further complicate things. Ethereum platform usage is priced in its native token, ETH, which is volatile and hard to account for. Institutions would rather pay in stablecoins or fiat equivalents, but support for that remains limited and inconsistent across networks.
Then there’s the lack of operational control. Banks and asset managers need fine-grained tools: the ability to halt transactions in emergencies, log compliance events in real time, and upgrade infrastructure as rules change. These features aren’t just “nice to have,” they’re table stakes in institutional settings. And yet, most blockchains require external tooling or governance workarounds to make them possible.
Finally, interoperability remains a major hurdle. Bridging across chains or connecting to existing financial systems is still clunky and risky. The bridges that exist are often insecure or expensive, and seamless integration with traditional infrastructure is still rare.
Together, these limitations explain why institutions continue to rely on permissioned sidechains, centralized custody and off-chain compliance workarounds, even when experimenting with on-chain assets.
Institutions Are Demanding Purpose-Built Infrastructure
The limitations of today’s public blockchains can’t be solved with incremental upgrades or middleware band-aids. Institutions aren’t waiting for someday fixes—they need infrastructure that can meet their standards now.
That urgency has sparked a wave of innovation. A new generation of appchain frameworks is emerging, designed from the ground up to satisfy institutional requirements. These systems take a modular approach to blockchain architecture, allowing projects to control everything from execution environments to fee models and compliance logic.
Instead of relying on third-party middleware or centralized off-chain services, some of these frameworks allow compliance features, such as KYC, audit logging and real-time controls, to be embedded directly at the blockchain level. That means identity checks and reporting don’t happen after the fact, but as part of the transaction itself. Instant finality is another area of focus, providing the kind of irreversible settlement institutions require to operate securely.
These infrastructure models also make it easier to support stablecoin-based fees, deterministic performance and governance structures that are flexible and auditable. For institutions looking to tokenize assets or operate financial applications, these capabilities aren’t just “nice to have,” they’re foundational.
By giving teams the ability to launch dedicated chains customized to their regulatory and operational needs, appchains eliminate many of the trade-offs that have previously kept enterprise-grade projects on the sidelines.
The Race to Institutional Readiness
More than $17 billion in RWAs have already been tokenized. The demand is real, but institutions won’t (and shouldn’t) compromise on foundational standards. The next wave of tokenization depends on infrastructure that’s purpose-built to meet these needs, not cobbled together with workarounds and third-party tools.
The institutions that figure this out will define the next era of blockchain adoption. And the infrastructure providers that support them won’t just power financial products, they’ll become the backbone of a new financial system.
Thiago Rüdiger is the CEO of the Tanssi Foundation, where he oversees ecosystem growth and decentralization for Tanssi’s modular blockchain infrastructure. He has more than 15 years of experience across technology, finance and blockchain strategy.