PwC projects global assets under management will reach US$171trn by 2028, growing at a compound annual growth rate of 5.9%. As organisations explore new growth opportunities, tokenisation stands out – and is expected to rise from US$40bn to over US$317bn by 2028.¹

While a strong growth opportunity lies ahead, with market-shaking levels of volatility having seemingly become a regular occurrence, what are the impacts and potential future repercussions for the sector? Rising to this challenge requires addressing multiple factors: delivering increased digital asset adoption and regulatory clarity; value-added and multi-custodial solutions; tokenisation of traditional assets; enhanced technological innovation; improved user experience and security; as well as expanded global market access.

To address the evolving components that are shaping the future of custody, Global Custodian hosted representatives from BNY, Deutsche Bank, Clearstream, JP Morgan and State Street at The Savoy Hotel, London for a discussion forum on 15 May. Paul Maley, Global Head of Trust and Securities Services and Regional Head of Corporate Bank (Americas) at Deutsche Bank, opened the session and set the scene.

“One of the biggest systemic changes we’re likely to see in the next couple of years is real-time, 24/7 transfer of value becoming a real thing,” he predicted. “For our industry, that means perpetual balance sheet velocity suddenly becoming a reality. Adapting to these changes, and what that means for our collective business model, will be significant.”

Disruptions once deemed unimaginable are now occurring with such frequency that they no longer shock in the way they once did, pushing so-called ‘black swan’ events into the realm of ‘grey swans’: foreseeable, if still deeply disruptive.

Whether the swan is labelled grey or black, 2025 has already seen significant upheaval. In early April, a major market shock followed sweeping tariff announcements from the White House. Dubbed ‘Liberation Day’, the move triggered a global shift in trade dynamics and, within just two days, had wiped US$6.6trn from US stock markets.

In response custodians faced a surge in transaction volumes and heightened operational strain, as clients rushed to rebalance portfolios amid the market turmoil. As the first major test since the US transitioned to T+1 settlement in May 2024, how well did the industry fare?

“Despite seeing record flows for pretty much every institution during that period, the response was fairly steady throughout,” explained Chris Rowland, Head of Custody, Digital and Fund Services Product at State Street. “If we look back to Covid-19 – when a huge spike in volume led to a lot of fails and fixes for the industry – it is clear we have come a long way in terms of how we’re set up, how we operate, and how, on a global basis, we can actually manage these types of events.”

Handling the pressure required a coordinated effort across the entire ecosystem. “We react to market events as an ecosystem, not as individuals,” said Fiona Neville, Managing Director, Head of Securities Services Europe at Deutsche Bank. “It is moments like this that global custodians really look to their sub-custodian for the strength and security to weather the storm.”

Ensuring that every part of the chain – both upstream and downstream – operates effectively isn't something that can be left to chance; it demands proactive and meticulous monitoring. “It starts with horizon scanning – understanding what might be coming and how we might respond. From there, it’s about examining ourselves both internally and externally,” said Ryan Cuthbertson, Global Head of Custody Services at BNY. “We maintain extremely granular monitoring across all applications, down to the server level within our technology stack, as well as continuously and consistently monitoring all external connections – whether they’re sub-custodians, CSDs, or clearing houses.”

“We react to market events as an ecosystem, not as individuals”
Fiona Neville, Managing Director, Head of Securities Services Europe at Deutsche Bank

When it comes to navigating disruption, Hannah Elson, Head of Global Custody at JP Morgan observed that it is often what happens in the event aftermath that is more interesting than the event itself. One such area of inquiry she is seeing centres on the issue of global sanctions.

“One of the learnings gleaned from the crisis in Russia was that while institutions tend to consider sanctions as being placed on the financial instrument, or the investor themselves, the way sanctions are applied is actually much more complicated,” said Elson. “It has come to include a range of other factors, including where the data is being processed, the location of the data centre, where the Swift addresses are, or even where staff are located.”

This complexity has been difficult to navigate in a world where western nations have been broadly aligned and coordinated in their application of sanctions. If this changes, the impact could be far reaching.

“We are starting to think about and prepare for what this might look like if there were a bifurcation of sanctions, as this would be a real test of our resiliency,” said Cuthbertson.

“That’s going to be incredibly challenging if you’re a global firm, because you’re applying sanctions on a global basis, through the headquarters’ institution. If there’s any dislocation in terms of how sanctions are applied, it’s going to be very hard to know which way to go, because we don’t currently deploy sanction screening capability at a legal entity level for Europe, and then a legal entity level for the US,” added Rowland.

Chris Rowland (State Street); Jonathan Watkins (Global Custodian)

Last year, the US, Canada, Mexico and Argentina successfully transitioned to T+1 settlement cycles. Despite early concerns about operational readiness and potential disruption, the shift was executed smoothly, with minimal short-term market impact. The successful navigation of recent market disruptions suggests this stability is likely to hold over the longer term as well.

Now, the EU, UK and Switzerland face the same challenge. Scheduled to transition to T+1 collectively on 11 October 2027, these markets share the same end goal – but the path they take is likely to differ significantly.

“Part of the success with T+1 in the US was because we were dealing, for the most part, with a single CSD – Depository Trust & Clearing Corporation – that did a great job of rounding the cats up. It is not going to be as easy as this in Europe – extra effort is needed to ensure all the cogs in the machine are moving in the same direction,” explained Cuthbertson.

By comparison, Europe has 24 CSDs connected to TARGET2-Securities – and several others that are not yet connected – that will need to align. “While it all comes under one banner of Europe, there is still a lot of market fragmentation,” explained Deutsche Bank’s Neville, in a recent flow article, titled Europe braces for T+1. “Each EU jurisdiction has distinct settlement infrastructures, local market cut-off times, and regulatory nuances.”

One additional example of this fragmentation is the misalignment between the securities market and the funds markets in Europe. “Some funds have subscription redemption cut-offs of between T+2 and T+6, while the equity markets operate on a T+1 basis,” said Rowland. “There is clearly going to be some form of dislocation – the asset community in particular is going to really have to think about how they’re managing that process.”

Sam Riley, CEO of Clearstream, added: “We should not forget that we in Europe are at the centre of the world from a time-zone perspective. A key aspect in this discussion is the daily operational timetable, which should reflect different business needs. One element that needs to be accommodated will be the shift of settlement start to midnight, allowing for an exchange position to include trading hours that start at eight and finish at ten at night.”

“There is clearly going to be some form of dislocation – the asset community is going to really have to think about how they’re managing that process”
Chris Rowland, Head of Custody, Digital and Fund Services Product, State Street

The transition from T+2 to T+1 settlement has inevitably sparked the question: can the industry push further to achieve T+0? One of the most talked about enablers is the use of digital assets and distributed ledger infrastructure, which promise atomic settlement – where trade execution and settlement occur simultaneously. It’s a concept that’s been circulating for years, but progress has been slow, not just due to technology, but also because of regulatory and operational hurdles.

Now, with the Securities and Exchange Commission’s rescission of SAB 121 and the introduction of the more flexible SAB 122, some in the industry see renewed momentum. Introduced in March 2022, SAB 121 required entities safeguarding crypto assets to record a corresponding liability and asset on their balance sheets. The rule deviated from traditional accounting principles and imposed significant compliance burdens, leading to widespread criticism. It has since been replaced by SAB 122, which offers a more flexible approach to crypto asset accounting and opens the door to further innovation.

So, is SAB 122 the ‘green light’ the sector was looking for? For Elson, the move is a step in the right direction. “The removal of SAB 121, combined with the overall openness of the new regime in the US, is going to make it a lot easier to move business cases forward in a timeframe that means they have a chance to successfully scale.”

The flip side to this – as noted by Cuthbertson – is that while many clients want their custodians to hold tokenised assets to simplify their operations and consolidate holdings, as you scale these solutions the risk rises in tandem.

“When you think about holding crypto assets on public, permissionless blockchains – which tends to be where people want to hold them – then we need to remember that these are open to everyone, including bad actors,” added Rowland. “The question then becomes: if something goes wrong, what is the damage in terms of reputation, trust and balance sheet? So I think as we get excited, we need to keep the return on investment top of mind.”

While striking the right balance between risk and reward remains paramount, there are encouraging signs that certain use cases might support this equilibrium. One potential area of interest is in supporting the transfer of wealth across generations. The US is on the brink of the largest transition of wealth in its history, which is being referred to as the Great Wealth Transfer. By 2045, an estimated $73trn in assets will be transferred from ‘baby-boomers’ to their heirs according to consulting firm Cerulli Associates.

“If even 5% of that sum becomes digital assets, that’s trillions that we need to be prepared for,” Neville observed. “If we look to the Middle East, where there’s huge amounts of private wealth sitting within families, we might ask, what if that’s tokenised and distributed to the next generation?”

This article is based on a forum discussion hosted by Global Custodian, titled ‘The future of custody roadmap’, which took place on 15 May 2025 at The Savoy Hotel, London. The participants were Ryan Cuthbertson (BNY); Hannah Elson (JP Morgan); Fiona Neville (Deutsche Bank); Sam Riley (Clearstream); Chris Rowland (State Street); Jonathan Watkins (Global Custodian).

Images: © Global Custodian

Sources

¹ See pwc.com