As financial institutions worldwide grapple with the implications of blockchain, BNP Paribas Asset Management is taking a pragmatic yet forward-leaning stance on the tokenisation of digital assets.
In a recent interview, Edouard Legrand, Chief Digital & Data Officer at BNP Paribas Asset Management, laid out the company’s evolving strategy and the industry-wide challenges that continue to shape adoption.
Legrand began by noting that the survey findings confirmed what insiders have long suspected: financial institutions are deeply engaged with the concept of tokenisation. “All the players in the field are looking at the topic,” he observes. Interest spans from institutional investors to asset managers, with various firms advancing at different speeds along the adoption curve.
Among the recurring themes across the survey were concerns around cybersecurity, interoperability between blockchain systems, and a lack of clarity in regulatory frameworks.
These align closely with internal discussions at BNP Paribas Asset Management. “We have some pieces of the puzzle,” Legrand says, “but we miss some clarity on certain points.” A key area requiring further development, he added, is the treatment of digital cash – whether in the form of CBDCs, stablecoins or tokenised deposits.
Discussing BNP Paribas Asset Management’s own tokenisation journey, Legrand describes it as a step-by-step process, deliberately cautious but increasingly ambitious. “To gain the benefit from blockchain, you need to have your full value chain on the same rail,” he explains. That means not just investing in tokenised instruments but also tokenising the fund itself and managing the cash leg of transactions on-chain.
The group’s initial forays included investing in a tokenised bond issued by French energy giant EDF in 2022. This bond embedded ESG data directly into the token – a feature Legrand calls “interesting” for its potential to automate compliance and investment decisions using smart contracts. Subsequent tests included similar investments and even coupon payments using tokenised methods.
More recently, BNP Paribas Asset Management went further by launching a natively tokenised share class of a money market fund in May. This internal experiment involved building a compliant legal framework, updating the fund prospectus, and using seed capital to test investment, settlement, and redemption entirely on a private blockchain.
The pilot, though not yet open to external clients, marked a significant milestone. “Now we know how to build a prospectus that would be compliant,” Legrand notes, hinting that wider client-facing rollouts may follow pending internal approvals.
As for the next steps, Legrand envisions expanding experiments to include tokenised nodes and bringing clients into the loop. Ultimately, the goal is to build and test a fully on-chain value chain – from tokenised investment instruments to tokenised funds, settled using digital cash. “Unless you have everything on chain,” he warned, “the benefits remain theoretical.”
The use of money market funds for initial testing is intentional. They are relatively simple, liquid instruments, making them ideal for early-stage experimentation. While less liquid assets might eventually benefit more from tokenisation – particularly through secondary markets – BNP Paribas AM is focusing on money markets for now.
When asked about the broader benefits for the financial industry, Legrand cites increased efficiency and potential improvements in settlement times. “Theoretically, it could be instant settlements,” he says, “but only if everything is on-chain.” For corporate treasurers managing multiple accounts across regions, programmable smart contracts could offer significant time savings and operational ease.
Still, challenges lie ahead. Chief among them is regulation. Legrand acknowledges that while the EU has taken early steps – such as the pilot regime for market infrastructure – much work remains. Clarity is particularly lacking on the use of digital cash, stablecoins and how different types of blockchain will interact. “We need to be clearer on what we consider a currency,” he says, noting the importance of managing counterparty risk, especially in stablecoins.
But regulation isn’t the only barrier. The complexity of transitioning an entire value chain onto blockchain rails requires coordination across multiple stakeholders. “Some actors may feel threatened by disruption,” Legrand admits, suggesting that inertia and vested interests might also be slowing progress.
Moreover, the incentives for issuers – corporates or governments – to opt for tokenised issuance remain limited. “Unless you have something fully ready,” he cautions, “you only improve a part of the process, not the whole.”
Comparing the current phase of blockchain integration to previous digital transformations, such as the shift to electronic invoicing, Legrand emphasises patience and readiness. “It’s a long time to prepare,” he says. “But when it happens, you’ll see the benefit.”
On the question of whether Europe is leading the global race, Legrand notes that the EU has been proactive in regulation. However, he also points to increasing momentum in the U.S. and Asia. “Everyone is moving quite fast,” he says, cautioning against any assumption of long-term leadership. “Europe has good assets and people working on this, so we should be ready in due time.”
One particularly noteworthy aspect of the survey addressed preferences for private versus public blockchains. The majority (59%) of respondents favoured private blockchains, which did not surprise Legrand, though he expected slightly higher support for public alternatives.
“Private blockchains offer more control,” he says, especially when it comes to meeting regulatory and audit requirements. However, public blockchains provide faster interoperability – albeit with less control. BNP Paribas Asset Management, he stresses, is testing both, aiming to be ready for whichever model dominates.
Legrand paints a picture of an industry on the brink of transformation – but not yet there. The path to full-scale tokenisation will be gradual and complex. Yet BNP Paribas Asset Management’s meticulous, phased approach shows that serious groundwork is already underway. “We see it as a puzzle,” Legrand said. “And we’re starting to put the pieces together.”
The Funds Europe-Caceis report into tokenisation can be viewed by following this link.
