Finally, finance's digital transformation

The case for blockchains as finance’s long-delayed cloud moment.

As someone who thinks of himself as a “crypto” person, I’ve always found it puzzling that Wall Street — and increasingly, Washington — insists on using the term “digital assets.”

Almost every asset I interact with on a regular basis is digital. I can’t remember the last time I carried cash. All of my personal finances, from bank to brokerage accounts, are digitized. I rarely even use a physical credit card anymore and, based on my interactions with peers, I’m not an outlier.

For most people in the developed world, the only assets that aren’t inherently digital are things like a house or a car. People call these “real assets,” a term that heightens the confusion by presupposing that everything else, from equities and bonds to network tokens and derivatives, is somehow not real. (They are real.)

What I’ve learned, though, from years of building and investing across the financial tech stack is that most of finance isn’t actually digital in the way we often believe it is. In most of the economy, everything — from media to retail to logistics — has been rebuilt around software. Finance looks similar on the surface, but underneath, it has largely been shielded from the digital transformation that mobile and cloud have wrought on the global economy.

That’s now changing.

Finance’s coordination problem

Financial institutions have long been stuck in the past. For the most part, they still run on fragmented systems that rely heavily on paperwork and constant reconciliation. They spend an enormous amount of time agreeing on shared states: who owns what, when something settles, how trades are ordered, and what rules apply. In theory, you could solve this with a shared database. In practice, that raises harder questions. Who controls it? Who can change it? What happens when the participants don’t trust one another?

This is why blockchains are gaining traction in places that look very different from the early crypto movement. Crypto, as a culture, was organized around ideas like decentralization and financial sovereignty. These ideas still matter, but ideology is not what’s pulling large financial institutions toward this technology. The more immediate problem is coordination.

Wall Street’s motivations are more practical than ideological. Every trading firm has a strong sense for the counterparty risk of an unreliable trading partner the same way every startup has a strong sense for the platform risk of building on top of a network like Facebook. Counterparty risk matters. Censorship resistance matters. Fair ordering and best execution matter. Wall Street doesn’t call it decentralization, but ultimately that’s what it’s trying to solve for.

Blockchains offer the first cogent answer to such longstanding problems, in my view. They provide a neutral system where multiple parties can coordinate without handing control to a single owner. They’re assets whose ownership rights are embedded in the software. There’s no separate ledger to reconcile against, no external record that determines who owns what. The asset is the record.

This is why Wall Street is beginning to adopt blockchains with zeal: Not because it’s fixated on the idea of decentralization, but because blockchains create a Schelling point amongst counterparties to upgrade existing backend systems. That’s what “digital assets” are actually getting at: They represent the digital transformation for financial services in the same way that cloud services once represented the digital transformation for large enterprises.

What comes with going onchain

As crypto moves toward Wall Street, it is shedding some of its renegade spirit and entering the grown-up world of collared shirts, compliance, and compromise. But by adopting blockchains to effect its digital transformation, Wall Street is (I suspect somewhat unknowingly) inheriting crypto’s biggest superpower, the same one that software has had for decades: composability.

What follows when financial assets live on shared, programmable infrastructure is that they can be combined, extended, and integrated without rebuilding everything from scratch. Some of the gains will be obvious, like faster settlement and lower costs, but the more important change is structural. It becomes easier to build on top of the system itself.

Crypto, in other words, doesn’t disappear as it moves into institutions, but it does get reframed. The movement becomes infrastructural. And as Wall Street adopts that infrastructure, it may find itself inheriting more of crypto’s spirit than it expected.

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