The five major protocols reshape institutional lending processes: How institutional capital chooses on-chain infrastructure

Institutional capital is accelerating onto the chain. Over the past six months, the on-chain deployment scale of real-world assets (RWA) has approached $20 billion, and this is no longer an experimental technology but a genuine shift of traditional finance towards blockchain migration.

In this wave, five key protocols are designing and optimizing credit processes for institutions: Rayls Labs provides privacy protection for banks, Ondo Finance enables cross-chain asset distribution, Centrifuge rebuilds institutional credit workflows, Canton Network transforms Wall Street settlement, and Polymesh embeds compliance at the protocol layer. They are not competitors but serve different specific needs of various institutions.

Market Size and Three Major Driving Forces

The growth of the tokenized asset market is remarkable. According to the latest market data, the scale of institutional-grade RWA has surged from $6-8 billion at the beginning of 2024 to nearly $20 billion, an increase of over 150%. This growth is unevenly distributed—government bonds and money market funds account for 45%-50% ($8-9 billion), the private credit market is expanding rapidly ($2-6 billion), and tokenized stocks have just broken the $400 million mark but are growing the fastest.

Three forces are driving this transformation. First is the appeal of yield arbitrage. Institutions are discovering that tokenized government bond products can offer annualized returns of 4%-6%, with 24/7 trading support, far surpassing the traditional market’s T+2 settlement cycle. Private credit tools provide even higher returns of 8%-12%. For CFOs managing billions in idle capital, the difference in efficiency and returns is enough to influence decisions.

Second, regulatory frameworks are becoming clearer. The EU’s MiCA (Markets in Crypto-Assets Regulation) has been enforced in 27 countries, the US SEC’s “crypto project” initiatives are pushing for institutionalized on-chain securities frameworks, and No-Action Letters enable infrastructure providers like DTCC to legally conduct asset tokenization. This regulatory clarity is eliminating early legal uncertainties.

Third, infrastructure maturity is evident. Chronicle Labs has processed over $20 billion in locked value, security audit firms like Halborn have certified major RWA protocols, and custody solutions now meet institutional standards. Yet challenges remain—cross-chain transaction costs reach $1.3-1.5 billion annually, price differences for the same assets across blockchains are 1%-3%, and conflicts between privacy and regulatory transparency are not fully resolved.

Privacy Layer: How Banks and Central Banks Participate

Rayls Labs, developed by Brazil’s fintech Parfin and supported by FrameworkVentures, ParaFi Capital, Valor Capital, and Alexia Ventures, is focused on designing privacy-first infrastructure for regulated entities.

Its Enygma privacy tech stack includes five core components: zero-knowledge proofs to ensure transaction confidentiality, homomorphic encryption for computations on encrypted data, native operations across public and private networks, atomic confidential payment workflows, and programmable compliance—allowing selective data disclosure to designated auditors.

Rayls addresses real issues faced by banks and central banks. The Central Bank of Brazil has adopted it in CBDC cross-border settlement pilots, the Núclea platform enables regulated receivables tokenization, and several undisclosed institutional clients are using its privatized payment and settlement workflows.

On January 8, 2026, Rayls completed a security audit by Halborn, providing necessary technical certification for institutions. Simultaneously, the AmFi alliance (Brazil’s largest private credit tokenization platform) announced plans to deploy $1 billion in tokenized assets on Rayls, supported by a reward of 5 million RLS tokens. This is one of the largest institutional credit process migration commitments in the current blockchain ecosystem.

Cross-Chain Asset Distribution: Retail-Friendly Expansion Path

Ondo Finance has achieved the fastest expansion from institutional to retail markets. Starting with government bond tokenization, it has grown into the largest platform for tokenized public stocks. As of January 2026, its TVL reached $1.93 billion, with tokenized stocks exceeding $400 million, accounting for 53% of the market share. On Solana, USDY holdings are about $176 million.

Ondo’s expansion strategy is highly aggressive. On January 8, 2026, it launched 98 new tokenized assets covering AI, electric vehicles, and thematic investments. It plans to launch US stocks and ETFs on Solana in Q1 2026, aiming to list over 1,000 tokenized assets long-term. Focus areas include Nvidia and data center REITs, Tesla and lithium battery manufacturers, and traditionally high-minimum-investment sectors.

Multi-chain deployment is central. Ethereum provides DeFi liquidity and institutional legitimacy, BNB Chain covers exchange-native users, and Solana supports sub-second finality, suitable for large-scale consumer use. Notably, while token prices declined, TVL still reached $1.93 billion—indicating that protocol growth takes precedence over speculation.

Ondo has established custody relationships with brokers-dealers, completed security audits by Halborn, and launched products on three major blockchains within six months, creating a clear lead. Competitor Backed Finance’s tokenized asset scale is only $162 million.

Challenges remain. Although tokens are transferable at any time, pricing still depends on exchange trading hours, which can create arbitrage gaps during US night trading. Securities laws require strict KYC and certification checks, which in practice limit the narrative of “permissionless” issuance.

On-Chain Reconstruction of Institutional Credit Processes

Centrifuge has become the standard infrastructure for institutional private credit tokenization. By December 2025, its TVL soared to $1.3-1.45 billion, driven entirely by actual deployed institutional capital.

Notable institutional deployments include Janus Henderson (a global asset manager managing $373 billion) partnering with Centrifuge to launch the fully on-chain Anemoy AAACLO fund—a AAA-rated secured loan security using the same investment team as its $21.4 billion AAACLO ETF. In July 2025, the project announced an additional $250 million investment on Avalanche.

Grove Capital within the Sky ecosystem has committed a $1 billion credit allocation strategy, starting with $50 million in initial capital, with founders from Deloitte, Citigroup, Block Tower Capital, and Hildene Capital Management.

On January 8, 2026, Centrifuge announced a partnership with oracle provider Chronicle Labs. Chronicle’s asset proof framework offers cryptographically verified holdings data, supporting transparent NAV calculations, custody verification, and compliance reporting, with dashboards accessible to LPs and auditors. This is the first solution truly meeting institutional oracle needs—providing verifiable data without sacrificing on-chain efficiency.

Centrifuge’s unique operation involves fully reconstructing the credit process on-chain. Issuers design and manage funds through a single transparent workflow, institutional investors allocate stablecoins, funds flow to borrowers after credit approval, and repayments are proportionally distributed to token holders via smart contracts. AAA assets yield an APY of 3.3%-4.6%, fully transparent. Its multi-chain V3 architecture supports Ethereum, Base, Arbitrum, Celo, and Avalanche.

Asset managers need to demonstrate that on-chain credit can support deployment of tens of billions of dollars—Centrifuge has achieved this. Its leadership in setting standards (co-founding the Tokenized Asset Coalition and Real-World Asset Summit) further consolidates its infrastructure position.

Migration of Wall Street Settlement Infrastructure

Canton Network exemplifies the response of institutional-grade blockchains to the permissionless DeFi paradigm. Supported by DTCC (Depository Trust & Clearing Corporation), BlackRock, Goldman Sachs, and Citadel Securities, Canton targets the $3.7 quadrillion annual settlement volume processed by DTCC in 2024—an enormous figure.

Collaboration with DTCC is critical. This is not a pilot but a core commitment to building the US securities settlement infrastructure. With SEC No-Action Letter approval, some US Treasuries held in custody by DTCC can be native tokenized on Canton, with plans to launch a minimally viable product (MVP) in the first half of 2026. DTCC and Euroclear jointly serve as co-chairs of the Canton Foundation, not as participants but as governance leaders.

Initial focus is on government bonds (lowest credit risk, high liquidity, clear regulation), with plans to expand to corporate bonds, equities, and structured products after MVP.

On January 8, 2026, Temple Digital Group launched a private trading platform on Canton. It offers sub-second matching order books in a non-custodial architecture. Currently supporting cryptocurrencies and stablecoins, with plans to add tokenized stocks and commodities in 2026. Ecosystem partners include Franklin D. Duntontown, managing $828 million in money market funds, and JPMorgan Chase, enabling payment and settlement via JPMCoin.

Canton’s privacy architecture is based on smart contract-level Daml (Digital Asset Modeling Language). Contracts specify which participants can see which data, regulators can access complete audit logs, counterparties can view transaction details, and competitors and the public cannot see any information. For institutions accustomed to Bloomberg terminals and dark pools, Canton’s design is particularly suitable—offering blockchain efficiency while protecting proprietary trading activities.

Native Compliance Design at the Protocol Layer

Polymesh stands out with its compliance embedded at the protocol layer rather than the smart contract layer. As a blockchain designed specifically for regulated securities, Polymesh performs compliance verification at the consensus layer.

Its core features include protocol-level identity verification (via licensed KYC providers), embedded transfer rules (non-compliant transactions fail at consensus), and atomic settlement (final confirmation within 6 seconds). Production integrations include Republic (supporting private securities issuance) and AlphaPoint, covering over 150 trading venues across 35 countries.

The key advantage is that there is no need for custom smart contract audits, the protocol automatically adapts to regulatory changes, and non-compliant transfers cannot be executed. For security token issuers troubled by ERC-1400 complexity, Polymesh’s approach is more attractive—embedding compliance directly into the protocol.

However, Polymesh currently operates as an independent chain, which isolates it from DeFi liquidity. To address this, plans are underway to launch an Ethereum bridge in Q2 2026.

The Market Is Not Zero-Sum: Infrastructure Layering

The success of these five protocols demonstrates an important point: institutions are not seeking “the best blockchain,” but rather infrastructure that solves their specific compliance, operational, and competitive needs.

Market segmentation is clear. On the privacy layer, Canton uses Daml smart contracts for Wall Street counterparties; Rayls employs zero-knowledge proofs for bank-level privacy; Polymesh achieves compliance through protocol-level identity verification. In terms of expansion strategies, Ondo manages $1.93 billion across three chains to pursue liquidity speed; Centrifuge focuses on the $1.35 billion institutional credit market for depth.

Target markets are distinct: CBDC and central bank needs point to Rayls; retail and DeFi point to Ondo; asset managers target Centrifuge; Wall Street settlement infrastructure points to Canton; securities tokens point to Polymesh.

From $8.5 billion at the start of 2024 to $19.7 billion now, the market size growth surpasses mere speculation. CFOs focus on yields and operational efficiency; asset managers aim to reduce distribution costs; banks seek compliant infrastructure. This market layering is more significant than many realize.

Three Unresolved Major Challenges

Cross-chain liquidity fragmentation remains the biggest risk. Current cross-chain costs are $1.3-1.5 billion annually, causing price differences of 1%-3% for the same assets across chains. If this persists until 2030, annual costs could exceed $75 billion. Even with advanced tokenization infrastructure, liquidity dispersed across incompatible chains will erode efficiency gains.

The contradiction between privacy and transparency remains unresolved. Institutions need transaction confidentiality, while regulators require auditability. In multi-party scenarios involving issuers, investors, rating agencies, regulators, and auditors, each party needs different levels of visibility, and no perfect solution exists yet.

Regulatory fragmentation adds complexity. MiCA applies to 27 EU countries; in the US, No-Action Letters must be applied for case-by-case, taking months; cross-border capital flows face jurisdictional conflicts. Oracle risks also exist—tokenized assets rely on off-chain data, and if data providers are attacked, on-chain asset performance will reflect false realities. Chronicle’s asset proof framework offers partial solutions, but risks remain.

Four Key Milestones in 2026

Ondo’s launch on Solana (Q1 2026) will test whether retail-scale asset distribution can create sustainable liquidity. Success indicators include over 100,000 holders, demonstrating genuine demand.

Canton’s DTCC MVP (first half of 2026) will verify the feasibility of blockchain in US government bond settlement. If successful, trillions of dollars could be transferred onto on-chain infrastructure.

Centrifuge’s Grove deployment (within 2026) will test institutional credit tokenization with real capital. If executed smoothly without credit events, it will significantly boost asset managers’ confidence.

Rayls’ target of $1 billion (mid-2027) for AmFi will test the adoption of privacy infrastructure in the institutional credit market. Without publicly available TVL data or pilot clients announced, this goal remains a key test.

Forecast for a Trillion-Dollar Market

Market size is expected to grow 50-100 times, reaching $2-4 trillion by 2030—assuming regulatory stability, cross-chain interoperability readiness, and no major institutional failures.

Industry growth varies significantly. Private credit has the highest potential, growing from $2-6 billion to $150-200 billion. Tokenized government bonds could reach over $5 trillion if they attract money market fund migration. Real estate depends on whether property registration systems adopt blockchain-compatible titles, with a potential of $3-4 trillion.

The milestone of hundreds of billions of dollars is expected around 2027-2028, with an estimated distribution: institutional credit $30-40 billion, government bonds $30-40 billion, tokenized stocks $20-30 billion, real estate and commodities $10-20 billion. This requires a fivefold increase from current levels. Despite the ambitious targets, considering the institutional momentum in Q4 2025 and upcoming regulatory clarity, these goals are not out of reach.

18-Month Critical Period

Execution takes precedence over architecture; results matter more than blueprints. Traditional finance is heading towards a long-term on-chain migration. These five protocols provide the foundational infrastructure layers needed for institutional credit process rebuilding: Rayls’ privacy layer, Ondo’s liquidity distribution layer, Centrifuge’s credit information layer, Canton’s settlement layer, and Polymesh’s compliance verification layer.

Their success will determine the future path of tokenization—whether as efficiency improvements to existing structures or as entirely new systems replacing traditional financial intermediaries. The infrastructure choices made in 2026 will shape the industry landscape for the next decade.

Institutional choices are not “either/or,” but demand-based selections of specific infrastructure. Rayls, Ondo, Centrifuge, Canton, and Polymesh each address different credit process optimization issues, collectively advancing the on-chain migration of trillions of dollars in assets. Settlement, credit issuance, privacy, and compliance in traditional finance are being reshaped—and this is precisely the direction infrastructure should develop.

Trillions of assets are on the horizon.