US Banks Brace for ‘Slow Then Fast’ Transition to Digital Finance: Moody’s

Traditional financial institutions are actively positioning themselves for a potential wave of adoption in order to avoid being unprepared for a sudden shift in market demand, according to Moody’s.

Major US banks and financial market intermediaries expect the shift toward a digitized financial system to begin gradually before reaching a tipping point that could rapidly accelerate adoption, according to credit rating agency Moody’s Ratings.

In a report released Tuesday, Moody’s Ratings said that discussions with US banks and other financial market intermediaries revealed that most participants see the transition as unavoidable and believe it will begin “slow, then fast,” with tokenization volumes expanding across more market participants, asset classes, and use cases.

Tokenization has emerged as a major factor driving institutional interest in blockchain technology and crypto, and the sector is expected to see substantial expansion over the coming years. ARK Invest, led by Cathie Wood, predicts digital assets could develop into a $28 trillion market by 2030, with Bitcoin, decentralized finance, stablecoins, and tokenized real-world assets serving as major growth catalysts.

Traditional Finance Is Building the Foundation for Digital Assets

According to Moody’s, tokenization activity remains limited at present, with most usage tied to cryptocurrency trading, cross-border retail payments, and select institutional applications. However, traditional financial institutions are actively preparing for a sharp increase in adoption.

The tokenized real-world asset market has expanded by more than 420% since the beginning of 2025 and was valued at $31.6 billion as of Thursday, according to analytics platform RWA.xyz.

In January, Morgan Stanley appointed veteran executive Amy Oldenburg to lead its newly formed crypto division, just weeks after unveiling plans to introduce three crypto exchange-traded funds and a crypto wallet.

Three Potential Scenarios for the Future Financial System

Moody’s said in a separate report released Monday that the financial system could develop along three different paths, depending on how quickly tokenization adoption progresses.

In the “steady growth” base-case scenario, which Moody’s considers the most likely outcome, the broader financial system would remain largely unchanged. Tokenization would expand within selected asset categories such as stablecoins and tokenized deposits, while traditional asset managers, banks, and infrastructure providers would continue holding central positions in the market.

However, under a low-growth scenario, where regulatory hurdles, unresolved legal uncertainties, and weak end-user demand have limited adoption, asset tokenization and digital money would remain restricted to niche use cases with only minor effects on the broader financial system.

The most disruptive scenario would emerge if tokenization experiences rapid expansion and assets such as stablecoins gain broad acceptance as an onchain settlement method.

Macro investor and former hedge fund manager Jordi Visser said on Saturday that the “tokenization reality” will begin unfolding this year, with tokenized assets expected to support payments driven by agentic AI systems.

Meanwhile, the International Monetary Fund said in April that tokenization could help reduce friction and improve transparency across the financial system, while also warning that the technology may introduce risks related to financial stability.