As blockchain technology continues to mature, institutional adoption is accelerating. 

Institutional investors are accelerating their commitment to digital assets in 2025, with over three-quarters planning to increase their allocations this year. According to a global survey by Coinbase and EY-Parthenon of more than 350 institutional investors, 83% expect to increase their digital asset holdings, and 59% plan to dedicate more than 5% of their assets under management to crypto or related products

This growing appetite spans beyond Bitcoin and Ethereum, with rising interest in altcoins, decentralized finance (DeFi), stablecoins, and tokenized assets.

Simultaneously, financial services firms—including asset managers and banks—are increasingly launching or exploring blockchain-based products and services, particularly those leveraging public blockchains like Ethereum. The launch of Bitcoin exchange-traded products (ETPs) by major asset managers in 2025 and the widespread institutional interest in stablecoins for yield and transactional efficiency highlight a broader industry shift towards integrating blockchain technology into mainstream financial offerings.

These trends are evidence of a shift not unlike the advent of ETFs, where digital assets and blockchain innovations are moving firmly into the investment mainstream, supported by growing regulatory clarity.

This post outlines how non-custodial, aka "decentralized" technology is essential to innovative institutional blockchain strategies and how it can serve as a foundation for secure, compliant and future-proof financial systems.

Decentralization as a Spectrum: Balancing Control, Openness, and Governance in Blockchain Networks

Decentralization in blockchain platforms exists on a spectrum, reflecting varying degrees of control, openness, and governance dispersion. At the most centralized end of this spectrum are private or permissioned blockchains, often chosen by institutional issuers to ensure privacy, regulatory compliance, and predictable governance. Examples include frameworks supported by initiatives such as the Monetary Authority of Singapore's (MAS) Interlinking Networks paper and JPMorgan's Project Guardian proof-of-concept, which demonstrates how private and public blockchains can be securely linked via decentralized interoperability protocols to combine regulatory clarity with broader access and liquidity. Firms like Deutsche Bank, Apollo Global Management, and Kinexys by J.P. Morgan have proposed issuance models positioned in this centralized segment, leveraging these interoperability connections to decentralized networks.

In the middle of the spectrum lie networks such as Solana, the XRP Ledger, and certain Layer 2 rollups employing single sequencers. These platforms embody a blend of characteristics, balancing throughput and operational efficiency with varying degrees of validator decentralization and governance openness. Their design choices reflect tradeoffs between performance and decentralization without implying superiority or inferiority relative to other approaches, as Interop Labs described in a recent SEC RFI Response.

Interoperability protocols that connect platforms across this spectrum play a critical role. To maintain the benefits of both centralized and decentralized systems—namely, regulatory compliance and innovation—these protocols themselves must be decentralized. Otherwise, they introduce custodial risk that spans all connected systems, potentially undermining the neutrality and resilience that public blockchains provide. This dynamic mirrors global commerce, where diverse national controls exist but international waters and airspace remain neutral, facilitating seamless interaction.

Composability and Super‑Apps: The Next Phase of Institutional Blockchain Innovation

Recent developments from US regulators highlight a vision for digital markets where composability—the ability to integrate diverse financial systems and services as modular building blocks—unlocks the next wave of innovation.

In remarks launching Project Crypto, SEC Chair Paul Atkins emphasized the potential for “super‑apps”: unified platforms where trading, lending, staking, and custody can operate under a single regulatory framework. These super‑apps will not be monolithic codebases built from scratch—they will emerge from composable infrastructure, allowing institutions to assemble pre‑existing components into seamless, full‑service financial environments (SEC, 2025).

The Crypto Working Group report (2025) described composability as going “beyond interoperability.” While interoperability connects networks for basic transfer of value or data, composability lets financial services plug into one another, combining protocols, asset standards, and settlement layers into new products at scale.

The Senate Banking Committee’s recent RFI on digital asset market structure (2025) reflects this same trajectory. It solicits feedback on how regulatory frameworks should enable connections between disparate systems—public blockchains, permissioned ledgers, and traditional financial infrastructure—so they can be integrated under a unified market structure. The RFI recognizes that modern capital markets will not exist on a single network but across heterogeneous, specialized platforms that must work together.

To achieve this, systems on the centralized end of the spectrum—private networks, permissioned issuance platforms, bank‑operated ledgers—will remain necessary to meet jurisdictional requirements, privacy standards, and regulatory controls for different asset classes. But composability depends on decentralized connectors in the middle, like Axelar, to link these silos safely and non‑custodially.

The long‑term vision: any system should be capable of becoming a building block for any other system. When a private issuance network can settle on a public chain, when tokenized collateral can flow seamlessly across jurisdictions, when market participants can compose new products from a palette of interoperable protocols—the conditions for super‑apps emerge. This is how financial innovation will scale: not by building everything in one place, but by enabling regulated, secure, cross‑network composability.

Realized Advantages for Financial Institutions

Financial institutions such as Citi, Goldman Sachs, and Euroclear have conducted on‑chain settlement pilots on public blockchains across a range of functions—including securities settlement, tokenization of assets, and interbank transfers. They are testing these systems to accelerate liquidity access, reduce systemic risk, and optimize collateral workflows. Here, we’ll focus on two concrete benefits:

• 24/7 real‑time settlement slashes capital tied up in delayed settlement cycles and dramatically reduces funding costs—without the multi-million-dollar implementation burdens of T+ systems.
  
  
• Avoiding vendor lock‑in through open protocols preserves agility, avoids escalating support fees, and mitigates multi-million-dollar vendor migration risks—translating into long-term savings and reduced operational risk.
  
  

Together these benefits enable more efficient liquidity management, improved resiliency, and lower infrastructure costs—making public blockchains not just technically interesting, but financially compelling for institutions piloting these systems.

1. Real‑Time Settlement: 24/7 Market Access Cuts Capital Costs

Traditional securities systems operate on business‑hour schedules and follow settlement cycles such as T+2 or T+1. Industry reports show that moving from T+2 to T+1 requires multi‑million dollar modernization programs—custodians spend up to $13 million in North America and $36 million in Europe each to implement the change. and 

The costs aren't only on project budgets: a Citi survey found that 46% of institutions experienced material funding gaps post‑T+1 transition, notably affecting securities lending and margin funding—eroding returns and increasing operational funding costs. 

By contrast, decentralized public blockchains settle trade and transfer instantly, 24/7/365. This eliminates overnight funding risks and enables capital to be redeployed in real time—dramatically reducing liquidity buffers and cost of capital.

2. Open, Composable Infrastructure: Avoiding Vendor Lock-In Saves Costs

Vendor lock‑in can impose serious financial burdens via ongoing maintenance fees and switching expenses. Many enterprise IT contracts include annual support and maintenance fees of up to 20% of the original purchase price, and prices for critical software rose nearly 62% over the past decade—well above inflation. 

In tightly integrated proprietary stacks, switching vendors often incurs not just direct migration costs but also years of redevelopment and operational disruption—often running into the millions per project. 

Building on open, decentralized protocols enables institutions to avoid these cumulative costs: they can govern shared infrastructure, switch components more easily, and maintain negotiating leverage—driving down total cost of ownership and enhancing strategic flexibility.

Interlinked Blockchain Networks for Institutions: Insights from MAS and JPMorgan

While immediate benefits like 24/7 settlement and freedom from vendor lock-in deliver clear bottom-line impact, institutions will realize the full potential of blockchain when permissioned and decentralized networks interconnect seamlessly. The next phase of innovation—demonstrated in the MAS' Project Guardian via Kinexys by J.P. Morgan's pilot—shows that linking these systems via interoperability protocols such as General Message Passing can scale tokenized finance beyond isolated silos. This hybrid model combines regulatory assurance with the speed, automation, and liquidity advantages of public infrastructure, laying the groundwork for a more efficient, resilient, and globally connected financial system.

Recent pilots under MAS' Project Guardian demonstrate that hybrid systems, linking centralized (permissioned) and decentralized networks, can address persistent inefficiencies in wealth and asset management. JPMorgan, working with WisdomTree, Apollo, Axelar, LayerZero and others, showed how tokenized funds across multiple blockchains can be managed at scale, improving efficiency, transparency, and client outcomes.

Such systems rely on interoperability protocols, such as General Message Passing (GMP), to securely connect disparate networks, synchronize ownership records, and enable cross-chain rebalancing. This approach allows institutions to retain the governance and privacy of permissioned systems while accessing the scale, automation, and liquidity benefits of public blockchains.

Risks and Design Considerations

Without interoperability, multiple private ledgers and token registries lead to market fragmentation, duplicative liquidity pools, and high onboarding friction for distributors and investors. MAS highlights that interlinking networks mitigates this risk while preserving regulatory control.

Designing for hybrid models offers institutions:

• Operational efficiency: Automation reduces manual workload and errors.
  
  
• Faster capital deployment: Near-instant settlement unlocks idle cash.
  
  
• Access to broader assets: Tokenized alts become practical to include in discretionary portfolios.
  
  
• Reduced infrastructure risk: Shared, interoperable systems prevent siloed liquidity and stranded assets.

A hybrid, interoperable architecture, linking private and public blockchains, offers institutions a path to scalable, compliant tokenized finance without sacrificing efficiency, liquidity, or global market access.

Conclusion: Decentralization as a Strategic Lever, Not a Replacement

Institutions don’t need to abandon centralized systems, but they must avoid becoming dependent on them. As the MAS paper concludes, future financial infrastructure will consist of interlinked, heterogeneous networks, where interoperability is the key to unlocking global liquidity and scalability.

In this model:

• Centralized networks provide control and compliance.
  
  
• Decentralized protocols ensure reach and resilience.

Axelar exemplifies what future-proof, institutional-grade infrastructure looks like: open standards over proprietary systems, decentralized governance over closed-door decision-making, and interoperability at scale. Its design aligns with institutional priorities: compliance, uptime, vendor independence, and network resilience. Axelar delivers the connective tissue, enabling financial institutions to retain their standards while transcending their silos.

Conclusion: From Private Pilots to an Evolution in Market Structure

A decade ago, the dominant narrative in institutional blockchain adoption was "blockchain, not bitcoin." Platforms like R3 Corda and Hyperledger Fabric offered controlled, permissioned environments that reassured regulators and suited enterprise IT requirements. Public blockchains were largely dismissed as too risky, too open, and too volatile for the world’s most conservative financial institutions.

That era is over. Today, pilots led by JPMorgan, Citi, Euroclear, WisdomTree and others—and regulatory initiatives from the MAS to the SEC—reflect a fundamental shift: It’s no longer about whether financial institutions will invest in crypto; it’s about how crypto will reshape the financial system itself. 

Public and hybrid blockchain networks are now seen as critical enablers of a more efficient, globally connected, and programmable financial ecosystem. The pilots and proofs of concept we’ve discussed in this paper illustrate why:

• Broader access and reach: Permissionless networks expand market participation, allowing products to integrate seamlessly across wallets, exchanges, and services worldwide.
  
  
• Composability and innovation: Modular, open infrastructure enables institutions to build on existing financial primitives, accelerating product development.
  
  
• Interoperability as a requirement: Scaling tokenized finance means connecting networks—permissioned and permissionless alike—using secure protocols for messaging and asset transfers.
  
  
• Operational resilience: Decentralized systems provide near-constant availability, reducing settlement delays, liquidity lockups, and single points of failure.
  
  
• Lower infrastructure risk: Open standards and interlinked networks help avoid costly vendor lock-in and fragmented markets.
  

What began as isolated private ledgers is rapidly evolving into shared, interoperable infrastructure, where public blockchains play a central role in institutional finance. This is not a side experiment anymore—it’s a redesign of market plumbing for the digital era, where decentralization becomes a competitive advantage rather than a hurdle.

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