The financial world is on the edge of a digital transformation.

A new report from the Official Monetary and Financial Institutions Forum (OMFIF) illuminates how blockchain and digital assets are slowly reshaping global markets.

The Digital Assets 2024 report highlights the growing role of distributed ledger technology (DLT) in areas like tokenized bonds and central bank digital currencies (CBDCs). 

While progress is being made, challenges remain. Blockchain is gaining traction as the infrastructure of the future.

The report reveals that 42% of financial professionals believe blockchain will dominate global markets.

Bonds are seen as the most likely assets to be tokenized, followed by commodities and public stocks.

Still, large-scale adoption needs to be revised. Most experts estimate tokenization is at least two years away, with many expecting it to take up to a decade to become mainstream.

Efforts to speed up settlement times are also in focus. The U.S. recently adopted T+1 settlement cycles, but only 16% of respondents support even faster timelines like T+0 or T+1 for bond markets.

Germany’s KfW has led innovation by issuing blockchain-based bonds, cutting settlement times from T+5 to T+2. While it’s a step forward, experts warn that infrastructure still needs to mature for broader adoption.

The debate over tokenized cash is heating up. CBDCs are the clear favourite, with 59% of participants preferring them for settling transactions.

On the other hand, stablecoins are viewed with skepticism, with only 23% favouring them and none supporting non-bank-issued versions.

Several pilot programs are exploring CBDCs. The European Central Bank and Swiss National Bank are testing digital currencies, while Slovenia issued Europe’s first sovereign blockchain bond using experimental cash tokens.

Automation is also driving efficiency in bond markets.

Documentation workflows are the most significant bottleneck; many believe automation and standardized templates are the solution. However, manual processes are still common.

Digital bonds are slowly gaining traction. Since 2022, 39 digital bonds worth $3.83 billion have been issued, with the Luxembourg Stock Exchange leading the way.

Legal firms like Clifford Chance also play a significant role in building the market.