Liquidations Won’t Stop Tokenization

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Introduction

Welcome to the Tokenized newsletter, brought to you by the creators of the Tokenized Podcast Simon Taylor of Fintech Brainfood, Pet Berisha of Sporting Crypto, and Shwetabh Sameer of Molten Ventures.

We are the newsletter for institutions that need help preparing for a Tokenized future.

We run through the headlines every week, what it means for you and a market readout. Always with an institutional, business-focused perspective. 

Join us every week as we meet your Tokenization needs.

Simon’s Market Readout 💬 

A Stark Reminder. 

For the uninitiated, this weekend just gone saw the biggest crypto liquidation in history.

Some tokens lost 50-90% of their market cap before rebounding.

Unheard of, even by crypto standards.

Here’s what happened:

• On Friday night, President Trump threatened a 100% tariff on China

• This sent the S&P 500 down 3.37% to a 29-day low, and Bitcoin followed falling 17% in a matter of hours

• This created a cascade effect, panic selling in thin markets compounded by the sudden evaporation of liquidity

• liquidity vanished, every sell theronin had an outsized impact, triggering further liquidations and accelerating the crash

• This caused huge discrepancies in price between exchanges, meaning for a while – the world couldn’t agree the prices of specific crypto assets 

• Synthetic Dollar USDE, created by Ethena, depegged specifically on leading crypto exchange Binance – caused by failing APIs and other things. There’s a good read up here by Dragonfly’s Haseeb.  

This was all the strongest possible reminder that the infrastructure in digital assets and crypto is still early. 

And at the same time, it also shows the sheer scale we're now operating in. 

When the liquidations can get to $20 billion, things can quickly get dramatic. And whilst the sell-off and bounce back grabbed the headlines, it also showed just how interconnected and large the onchain finance world has become. 

For detractors, it becomes just another reason to say: See, I told you, it's not ready yet. 

This was a result of some mispriced assets and other exchanges that triggered a wave of liquidations. 

The question I asked myself was: How different is that from 2008?  

In 2008, the biggest issue was that we didn't know whether the underlying assets that most of the banks held were solvent or not. 

We didn't know if our counterparties were solvent. 

We didn't know if banks could open tomorrow and if they could draw down on the liquidity they needed, because nobody knew what was inside the collateralized debt obligations or CDOs. 

This 2025 crypto example has its own type of derivative, the perpetual future or the ‘perp’ that seems to be in the middle of a lot of these conversations, but the primary issue is that different parts of the crypto infrastructure priced those positions differently, and this wasn't a solvency issue. 

It was quite clear that most of the assets that were being used as collateral, in this case, Ethena, were, in fact, completely solvent. 

What we couldn't agree on was what the price was, and within 24 hours, crypto Twitter had not only found out the root cause of the issue, but it delivered countless data-driven analyses of the cause.

And indeed, within 19 hours, Binance had begun refunding traders. 

This is unheard of in the TradFi world. 

Do Banks still want to go onchain?

There's a really interesting tension as these large institutions go onchain, because the one non-negotiable is privacy. 

They know they need the transparent ledger. 

They know they need the ability for everybody to reconcile all of their transactions, but they don't necessarily need to reveal what those transactions are and who is having them. 

These large institutions tend not to go on to experimental defi marketplaces to make all of their trades and manage positions. 

I really do think this is apples to oranges. And the lesson here is not that crypto infrastructure cannot be used, it's that you shouldn't necessarily dive in at the deep end, when learning to swim may cause more fear and kind of set you back further than you realize. 

Despite that being a popular metaphor, I think what happens from here is actually…the work continues. 

We see that BVNK has been valued at nearly $1-2 billion in rumoured acquisition interest from Coinbase and MasterCard. 

The company recently announced their stablecoin process volume was running at a 20 billion annualized rate, and that is continuing to grow. 

And we also see that in the last 12 to 18 months, the vast majority of that growth is coming from the United States.

Crypto will always have a blow up. Crypto will always have a sideshow. Crypto will always have its drama, and that will always happen at the front here, but behind it, the appetite for institutions is not slowing down.

Bitcoin has an ETF. 

Stablecoins have found product-market Fit.

Banks are tokenizing deposits and launching consortia-led stablecoins. 

Perpetual futures in crypto are the party in the basement. But slowly and surely, crypto is starting to host the fancy events at the Ritz. The private dinners. And also selling out stadiums for live concerts. 

The legitimization of Tokenization is happening all at once, and even cascading liquidations when everyone is asleep can’t stop it.

📰 Some More News:

🏦 Tokenization, Stablecoins & Finance

• BlackRock confirms plans to tokenize iShares ETFs for digital wallet investors (Read more here)

• Citi to launch crypto custody in 2026 (Read more here)

• Ten systemically important banks collaborate on stablecoin-like initiative (Read more here)

• Stablecoin Issuers Race for US Bank Charters as Stripe's Bridge Joins the Queue (Read more here)

• S&P Global & Chainlink launch onchain stablecoin risk assessments (read more here)

• Morgan Stanley broaden client access to crypto investments (Read more here)

• Metamask adds Hyperliquid swaps, eyes polymarket integration (Read more here)

🤑 Funding and M&A

• Coinbase and Mastercard have both held advanced talks to buy stablecoin startup BVNK for around $2 billion (Read more here)

• Coinbase to Invest in India's CoinDCX, Expand in South Asia and the Middle East (Read more here)

• Citi backs BVNK in strategic investment (Read more here)

💼 Government & Policy

• ECB publishes assessment of digital euro CBDC holding limits on financial stability (Read more here)

• Japanese Regulators eye Ban on Crypto Trading (Read more here)

• Singapore Regulator Delays update to crypto rules for banks until 2027 (Read more here)

• Bank of France proposes Direct EU oversight of Crypto firms (Read more here)

Tweet of the Week 🐤 

From Kevin

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