The Capture: How Wall Street Colonized the Tokenization Revolution

📊 Data Verified: 05 Dec 09:15 UK | RWA Market: RWA.xyz | BUIDL AUM: DeFiLlama | Ondo TVL: DeFiLlama | Regulatory: SEC.gov

At a Glance

The question nobody’s asking: Who colonized whom?

The Victory Lap

BlackRock launched BUIDL and it hit $2.9 billion. Larry Fink says every asset can be tokenized. JPMorgan issued a deposit token on Base, Coinbase’s public Ethereum L2. Tokenized RWAs doubled to $30 billion.

The narrative writes itself: Wall Street capitulated. Blockchain won. The trillion-dollar migration has begun.

Now look at who actually depends on whom.

Follow the Control

BUIDL is the crown jewel of institutional tokenization. A money market fund investing in short-term Treasuries, yielding about 4.5%, with nearly $3 billion in assets. The largest tokenized fund in existence.

It’s also permissioned. You pass KYC through Securitize. Your wallet gets whitelisted. BlackRock controls the fund, BNY Mellon custodies the assets. Investors must be qualified purchasers under U.S. securities law.

This isn’t DeFi. It’s a money market fund with a blockchain wrapper.

BUIDL’s growth isn’t driven by traditional investors discovering crypto. It’s driven by crypto-native protocols using it as reserve collateral. Ondo transferred $95 million into BUIDL within a week of launch. Ethena allocated hundreds of millions as reserves for its USDtb stablecoin. Frax designed frxUSD to be backed by BUIDL holdings.

The protocols that were built to disintermediate Wall Street now depend on BlackRock for their collateral.

The Trojan Horse Went the Other Way

DeFi’s original thesis was radical: permissionless finance, no gatekeepers, disintermediation of the institutions that failed us in 2008.

Tokenization was supposed to extend that vision. Bring traditional assets into crypto’s permissionless infrastructure. Make them composable, accessible, free from legacy control.

That’s not what got built.

JPMorgan’s Kinexys platform is the clearest illustration. In June 2025, they launched JPMD, a USD deposit token, on Base, a public Ethereum L2. The rails are public. The access is not. JPMD is available exclusively to JPMorgan’s institutional clients. Whitelisted wallets only. The blockchain is open; the token is gated.

This is the capture pattern in its purest form: public infrastructure, private permissions.

The SEC’s framework under Chairman Atkins makes the logic explicit: tokenized securities remain securities. Same registration requirements. Same investor protections. Same compliance obligations. Just new rails.

What about secondary liquidity? Direct BUIDL units operate as buy-and-hold: purchase from the issuer, redeem to the issuer. Wrapped versions like Ondo’s OUSG have developed some secondary trading through regulated venues like Assetera in Europe. But that trading still runs through gatekeepers, not open DeFi pools. The liquidity isn’t pooled. It’s fragmented across compliant islands that don’t interoperate.

Where’s the 24/7 permissionless trading? Where’s the democratization?

It was never the product.

The product is Wall Street accessing DeFi’s distribution rails while keeping permissionless chaos at arm’s length.

Dependency Flows One Direction

Be precise about the relationship.

DeFi protocols need TradFi products. Ondo ($1.6B+ TVL), Ethena, and Frax need yield-bearing collateral that’s compliant, stable, and institutionally credible. BUIDL provides that. Without it, their stablecoin architectures don’t work.

TradFi doesn’t need DeFi. BlackRock isn’t using Uniswap for price discovery. JPMorgan isn’t settling through Aave. The flows run one direction: DeFi protocols pull TradFi products on-chain as infrastructure. TradFi doesn’t pull DeFi products into its systems.

JPMorgan’s own research is blunt: the tokenized RWA market remains small, and most of it is driven by crypto-native firms rather than Wall Street incumbents. Wall Street isn’t buying what DeFi is selling. DeFi is buying what Wall Street is selling.

The regulatory moat is the feature, not a bug. Nearly all tokenized asset participation requires KYC/AML compliance. That permissioned layer is precisely what lets institutions participate without regulatory risk. And precisely what ensures control never actually transfers to the chain.

The Steelman

The case that this is still a net positive:

Even if TradFi keeps control, blockchain infrastructure reduces settlement times, cuts costs, enables programmability. Efficiency benefits everyone. JPMorgan choosing Base over a fully private chain suggests public infrastructure is winning on merits. And DeFi needed sustainable yield sources. Real yield from real assets beats farming governance tokens to oblivion.

All fair. Atkins himself frames the shift constructively: his goal is “to make things transparent from the regulatory aspect and give people a firm foundation upon which to innovate.”

But the original vision wasn’t “more efficient Wall Street.” It was an alternative to Wall Street. At some point, if every on-chain yield source is a permissioned TradFi product, and every major protocol depends on BlackRock’s collateral, the distinction between “crypto finance” and “finance with crypto characteristics” collapses.

That might be fine. It might be inevitable. It’s worth being honest about what it is.

What This Actually Means

The tokenization is real. The revolution isn’t. The market doubled. Infrastructure is being built. But what’s being tokenized is TradFi products on TradFi terms. The control structures didn’t change. They just got more efficient plumbing.

Public rails don’t mean permissionless access. JPMorgan on Base proves the pattern. The blockchain can be open. The assets can still be gated. Infrastructure and access are different things.

DeFi’s dependency is structural. Protocols need compliant, yield-bearing collateral. That need deepens as the space matures and regulatory pressure increases. BUIDL isn’t a bridge product. It’s becoming the foundation.

The winners are already clear. BlackRock. Securitize. JPMorgan. Franklin Templeton. The institutions that can offer compliant, yield-bearing products that protocols need. Not the protocols themselves.

The Framework

Watch the collateral layer. Whoever controls what protocols use as reserves controls the ecosystem’s foundation. Right now, that’s increasingly BlackRock.

Watch the regulatory moat. The SEC aims to begin rulemaking by early 2026 to establish a comprehensive crypto asset framework. The rules being written now will determine whether permissionless alternatives can compete.

Watch the gap between rhetoric and reality. “Democratization” and “24/7 access” are marketing. Track actual secondary market volumes on open venues. Track actual retail participation beyond regulated wrappers. The story being sold isn’t the story being built.

The Synthesis

One story is being celebrated: Wall Street adopted crypto. Tokenization is the bridge. We won.

Another story is happening: Wall Street adopted blockchain as plumbing while keeping every control structure intact. DeFi protocols now depend on TradFi products for their foundational collateral. The capital flows, the permissions, and the control all run one direction.

DeFi spent a decade trying to disintermediate Wall Street.

Wall Street spent three years building BUIDL.

Just look at the collateral inside your favorite DeFi protocol. It’s likely BlackRock.

Sources: RWA.xyz | DeFiLlama | CoinDesk | SEC.gov | JPMorgan | Assetera

Pierce & Pierce publishes educational market commentary. Pattern recognition, not investment advice.