Interoperability will define the next financial layer
In 2023, the BIS proposed a "unified ledger," a single platform for tokenized money and assets. Three years later, I've watched the industry move in the opposite direction instead. Actually, the financial system is splitting into many ledgers. Banks and central banks are building tokenized deposits, digital currencies, stablecoins, and private settlement networks in parallel, and because most of them compete, few have reason to build on a rival's platform. Each of these systems works on its own. The difficulty is that they do not work with one another.
The competition is already visible in the market, where JPMorgan runs Kinexys, Citi runs Token Services, and a group of banks is getting behind Canton, each building its own tokenized-settlement network with little reason to move onto a competitor's. McKinsey frames the practical consequence of this fragmentation, noting that tokenized deposits which cannot move between banks are worth little beyond the one that issued them. The BIS reaches the same conclusion from the top down, describing weak interoperability between platforms as a core obstacle to scaling tokenization. Money that cannot leave the network it was created on keeps liquidity thin and settlement fragmented, however capable any individual platform may be.
My team builds IBC, the Inter-Blockchain Communication protocol, which lets two ledgers connect and transact directly, without a third party in the middle holding the counterparty risk. It has run in production for five years across more than 115 networks, moving tens of billions of dollars a year without there ever being an exploit of the supported version. This adoption and the strong security record are due to IBC’s architecture. Each ledger verifies the other's state itself rather than trusting an intermediary, whereas it is that intermediary that has failed in most cross-chain systems. We are now bringing IBC to the systems institutions actually run, across EVM, Canton, and Hyperledger, beginning with Besu.
We built it so that an institution can connect using the systems it already has, without replacing its core. Institutions use IBC to communicate directly, peer-to-peer, between any two ledgers or systems. That means an institution that connects today stays flexible as its business evolves, connects to new systems as they come online, and captures new opportunities in the market instead of rebuilding to reach them.
Institutions are now able to move data as well as workflows once connected, not just tokens alone. A network limited to settling tokens still leaves compliance, reporting, and the surrounding multi-party processes to be assembled by hand, which is why moving the workflow matters as much as moving the asset.
The harder part has always been coordination rather than cryptography, namely getting institutions that compete to agree on how tokens redeem, how finality and compliance are handled, and how disputes are resolved, without requiring any of them to rebuild in order to participate. A network that demands a technology overhaul as the price of joining loses the first institution that cannot justify one, and its growth stalls there.
McKinsey expects roughly $2 trillion in tokenized assets by 2030, spread across many systems. The institutions positioned to capture that market will be the ones built to reach across multiple networks. How much of that an institution can eventually reach will be shaped largely by the interoperability choices it makes today.
About the author
Alex Johnson is Head of Product for the Cosmos Stack, where he leads product for IBC and the stack as a whole. He has spent years working on distributed systems as both an engineer and a manager, so he understands how the technology works under the hood as well as what to build with it. What drives him is developer empathy, building tools that institutions and developers can actually pick up, use and succeed with.
