Ivo Jeník
Senior Financial Sector Specialist

Ivo Jeník currently leads CGAP’s project on regulatory architecture at the frontier, including work on tokenization in finance, competition, and open finance supervision. He also leads CGAP’s work related to anti-money laundering and counter-terrorist financing measures, including collaboration with the Financial Action Task Force. Previously he led work on regulatory innovation (open finance, regulatory sandboxes, crowdfunding), capacity building for policy makers (regulation and supervision of digital financial services), and emerging business models in banking across continents.

His professional experience spans both the private and public sectors. Before joining CGAP, he worked in the Responsible Financial Access team at the World Bank, where he specialized in financial consumer protection and alternative dispute resolution. His professional experience spans across both the private and public sector, including serving as a compliance officer at an investment company and as Head of the Collective Investment Department at the Czech Financial Ombudsman.

Ivo has a master’s degree in law from Columbia Law School in New York and a master’s degree in law from Charles University in Prague.

Tokenization of Real-World Problems

Tokenization may become one of the most important infrastructural shifts in digital finance, but it may take more effort than some believe. Tokenization is exceptionally good at reducing coordination and transaction costs in digital systems. It is less effective at solving structural problems rooted in the physical world — such as weak identity systems, poor legal enforcement, or concentrated market power.

Disclosures first. I originally started writing this article with a bold statement in mind: “tokenization will change everything as we move deeper into a hyper-digitized reality where much of our professional and personal lives depend on digital infrastructure.” I started drafting, then reconsidered the statement, and then reconsidered it again. What follows is therefore an invitation to a more measured discussion of a topic that tends to attract both uncritical enthusiasm and uninformed skepticism.

Definition second. In this article, tokenization refers to blockchain-based systems in which ownership claims, rights, or assets are represented digitally on shared programmable ledgers. Tokenized systems can enable direct transfer, automated execution through smart contracts, and interoperability across applications without relying on a central coordinating intermediary. Programmability allows rules, ownership transfers, and economic logic to be executed automatically across shared infrastructure. This creates possibilities not only for lower-cost transactions but also for entirely new forms of coordination between market participants.

For instance, stablecoins backed by high-quality liquid assets can reduce dependence on traditional correspondent banking for settlement and transfer in cross-border payments. Buying and selling a house on tokenized infrastructure could become faster, cheaper, and operationally simpler, with fewer intermediaries involved (e.g., deed transfer, escrow, and transaction coordination). Issuing a song as a token with licensing terms embedded in a smart contract could allow artists and producers to regain greater control over revenue streams and reshape parts of the music industry.

But how can tokenization help solve some of the hardest real-world problems, such as financial exclusion? Today, 1.3 billion adults remain financially excluded, often due to the high cost of financial services and missing documentation. Informal micro and small enterprises in developing markets continue to face a $2.5 trillion financing gap. Can tokenization materially change this reality?

The answer is more ambivalent than many might hope for three reasons: (1) tokenization does not directly address structural challenges that originate in the physical world, (2) lower transaction costs do not necessarily translate into affordability for end users, and (3) incumbents may resist solutions that threaten their market positions.

The first challenge is the most difficult to address. Consider the persistent problem of missing documentation as a barrier to financial inclusion. According to the World Bank, 850 million people lack proof of identity, making them effectively ineligible for formal financial services. What these individuals need is a reliable identity — whether in the form of a government-issued ID card, a verified SIM registration, or a tokenized credential stored in a crypto wallet. Some of these systems may be functionally superior to others, but the underlying challenge remains the same: identifying someone who often lives in a remote or conflict-affected area with limited reliable information recognized by financial institutions.

This illustrates a broader point: tokenization primarily solves coordination problems inside digital systems. It does not automatically solve problems originating in the physical world. Further, many tokenization projects underestimate the importance of legal enforceability. A token may digitally represent ownership of an asset, but unless courts, registries, and regulatory systems recognize that claim, the token alone has limited real-world meaning. In practice, tokenization often works best when integrated into existing institutional frameworks rather than attempting to replace them entirely.

The second challenge is familiar to many financial inclusion practitioners. The cost of designing and delivering financial services can decline significantly without those savings being passed on to consumers – and this applies to traditional finance as much as it applies to tokenized finance. Efficiency gains may instead be reinvested, captured by intermediaries, or distributed to shareholders. Whether lower costs translate into broader affordability is ultimately a business and market-structure question, not a purely technological one.

The third challenge concerns disintermediation and market power. Tokenization can reconfigure or replace existing systems. Stablecoins, for example, reduce reliance on parts of the correspondent banking system in cross-border payments. If adoption continues to scale, some incumbents whose business models are affected will inevitably resist change. For instance, through control of distribution channels or restricted access to infrastructure. This is where policymakers will need to play an active role in maintaining competitive neutrality and ensuring that regulation does not unintentionally entrench existing market structures.

For the first two challenges – structural challenges originating in the physical world and non-passthrough of cost savings – tokenization primarily expands the range of available tools rather than fundamentally changing the underlying constraints. In some cases, that may still be enough to create viable new business models — for example, ecosystems where tokenized assets are used as collateral in agricultural finance. But the deeper structural problems often still require public infrastructure investment, institutional capacity, and government support. The third challenge — incumbent inertia — can be addressed through regulatory intervention, similarly to the way regulators have required large banks to share customer data under open finance regimes.

There is no shortage of examples where financial innovation has promised to expand access to underserved populations but ultimately ended up primarily benefiting those who were already well served. Usually, one of the three constraints outlined above was part of the explanation. Tokenization already shows signs of facing similar dynamics. Rather than the technology itself, the financial inclusion outcome depends on the distribution channels, investor protection, and regulatory frameworks built around it. The decisions made today and in the coming years — by technologists, policymakers, development practitioners, and financial institutions — will shape whether tokenization merely creates more sophisticated financial infrastructure for those already served, or contributes to building a better, inclusive financial system.