Goldman Sachs, Wells Fargo and Morgan Stanley see tokenization as a growth opportunity rather than a threat to existing businesses. Executives outlined different opportunities during this week's third-quarter earnings calls: trading for Goldman Sachs, money transmission for Wells Fargo and advisory services for Morgan Stanley. None of the executives assigned a revenue figure to the opportunity.
Tokenization brings financial and real-world assets onto a blockchain. A growing number of companies say the companies offer or plan to offer tokenized equities, bonds and commodities. Those assets can trade around the clock with few, if any, geographic restrictions.
Goldman Sachs CEO David Solomon was asked whether tokenization, decentralized finance and prediction markets could reduce the firm's trading revenue. Solomon said those developments could instead expand the business. Solomon cited the shift toward electronic stock trading almost 50 years ago, which raised similar concerns before Goldman Sachs adapted and expanded the bank's equities business. Solomon said tokenization could follow a similar path. Solomon said on Tuesday's call with analysts that the developments were creating more products, greater activity, potentially new clients and broader distribution channels.
Goldman Sachs has spent years investing in digital asset infrastructure. Goldman Sachs built GS DAP, the bank's platform for tokenized assets, as long ago as 2022. Goldman Sachs has worked on tokenizing bonds, money market funds and real estate. Goldman Sachs participated in a half-day run of a Depository Trust & Clearing Corporation (DTCC) tokenization service in July. DTCC supports much of the infrastructure behind U.S. securities markets and processes quadrillions of dollars in transactions each year. Goldman Sachs is now examining ways to use the service on a larger scale. Solomon said tokenization could cut costs, automate transactions and make assets easier to trade. However, Solomon described current activity as small and marginal.
Wells Fargo already processes cross-border payments using tokenized deposits, with money reaching beneficiary accounts in two minutes or less. Wells Fargo CFO Michael Santomassimo said the service is in production but handles small volumes so far. Wells Fargo lacks the large international branch network that some global rivals operate. Santomassimo said tokenized deposits could help Wells Fargo win more cross-border payments business without building that network. Wells Fargo also sees possible uses in tokenized securities, real-world assets and crypto trading for wealth clients. Santomassimo did not specify when those services might become available.
Morgan Stanley is looking to tokenization to create more demand for wealth management advice as investors gain new ways to move assets. Morgan Stanley CFO Sharon Yeshaya said faster and easier investment transfers would not eliminate clients' need for advice. Morgan Stanley has been investing in digital capabilities across the bank's wealth management and institutional securities businesses. Yeshaya identified tokenization as another opportunity for Morgan Stanley without announcing a new product.