Citi Securities Services Evolution 2025

Securities Services Evolution 2025 | 29 Creating the crossroads How then to further enable a bridging of these two worlds of digital liquidity, given competing visions of the foundational architectures that are needed to drive growth? As we highlighted in Figure 14, the world’s (TradFi) institutions have primarily turned to private blockchain networks as they look to upgrade their legacy architectures whilst managing their execution and cyber-security risks. Meanwhile, DeFi providers are using open, permissionless networks to increase access and to democratize markets. How can firms reconcile this desire for incremental operational performance improvements with minimal risk (on the part of TradFi houses) against an ability (by DeFi firms) to deliver transformational benefits, albeit with privacy risks today? Is a bifurcation of liquidity between TradFi and DeFi markets inevitable? Standing in between these two, seemingly opposing models, are a growing range of hybrid models that can combine key elements of traditional finance with the technology of decentralized finance (DeFi) to meet the needs of regulated financial institutions, and hence help to drive convergence in place of divergence. In 2025, permissioned blockchains have continued to demonstrate their unique role in providing both access and security to financial institutions. On the one hand, they are distributed and use smart contracts to automate trade cycle activities without the need for a central intermediary – thus providing the efficiency, transparency, and automation that are hallmarks of DeFi. On the other hand, they are permissioned, with only pre-approved participants allowed to transact, based on a whitelist of approved wallet addresses (meaning that regulated institutions are able tomanage their Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements, even in a public network context). These networks then offer the control and permissioning that are critical to institutional firms, so that trade order books and positions can be safely managed. To further bridge public and private networks, technology providers have started to innovate and introduce hybridmodels that operate in a more decentralizedmanner, but still retain privacy and whitelisting control that traditional financial institutions desire “With millions of digital assets spread across thousands of public and private blockchains, interoperability between blockchains is absolutely critical to overcoming fragmentation and building scalable global markets. This mirrors the early Internet, which was once divided into isolated intranets until TCP/IP unified them into a single network. On top of such a unified foundation, DeFi is already demonstrating how blockchain and oracle technology can modernize traditional capital markets and usher in a new era of more efficient, transparent, and programmable financial services. Chainlink seamlessly connects data and value across blockchains and traditional systems, accelerating the inevitable convergence of DeFi and TradFi into a unified global financial system.” Sergey Nazarov, Co-Founder of Chainlink As we highlighted earlier in the paper, this significant change in regulatory posture in the US is having a real impact and are translating into real volumes. DeFi’s total value locked (TVL) reached USD153 billion in July 2025 30 , its highest level in three years. Of this, USD7.3 billion is held in tokenized US government debt 31 (a three-fold increase from August 2024) and USD2.3 billion in Blackrock’s tokenized money market fund, BUIDL (a 400% increase from January 2025). The walls between the TradFi and DeFi worlds are coming down. What does convergence look like in practice? Drawing on a foundational blueprint of digital securities that are entirely mobile, 24/7 hours a day, experimentation with tokenization has highlighted significant benefits across the trade cycle. When a security and cash are tokenized, repos on Saturday mornings can become commonplace, for example, whilst concerns around settlement acceleration (including T+0) could be instantly resolved through the use of blockchain as it is known today. But this is just the beginning. Digital assets are delivering transformational benefits for institutions in numerous use cases. They are helping private firms to access capital without the complexity of listings by tokenizing private shares and private share derivatives. Stablecoins can potentially help firms to rationalize their cash management and allow instant access to funding). Each of these use cases stretches well beyond the current boundaries of institutional development – and each has the potential to scale quickly into the world of traditional finance, taking the world’s banks into a new era of speed, efficiency and returns.