Tokenization has become one of crypto’s favorite buzzwords, but Grayscale head of research Zach Pandl said investors should think about it less as a single trade and more as a long roadmap with different winners at different stages.

Speaking at EthCC conference in Cannes, France, Pandl said that the trend is still in its infancy. Tokenized assets — the process of using blockchain rails to settle, transfer and record ownership of all kinds of financial assets such as bonds, funds and equities — is rapidly growing. However, currently at $27 billion, it still represents roughly 0.01%, a tiny fraction, of global capital markets. That’s projected to swell to near $19 trillion by 2033, according to BCG and Ripple.

Big banks and asset managers already understand the opportunity. “The two things that institutions are aware of are stablecoins and tokenization,” Pandl said. But they are still trying to figure out where to allocate capital to actually benefit from these innovations.

From here, Pandl expects tokenization to unfold in phases, with different types of networks and models capturing value at each stage.

The first winners, he said, may be projects that look more like traditional finance, not less.

“In the early stages of the tokenization process, you will see things that have success that look more similar to how the financial system works today,” he said.

That means institution-centric, permissioned systems that solve practical issues like privacy, identity and control.

Pandl pointed to the Canton Network (CC), backed by Wall Street giants like DRW, TradeWeb, Goldman Sachs and Nasdaq, as a potential winner in this early phase of tokenization.

He said it is “a perfectly reasonable investment” for investors who want nearer-term traction, even if Canton’s approach represents only “a slightly different, slightly upgraded version” of today’s financial system.

The second phase

The second phase of tokenization could be a hybrid model where we have both institution-owned blockchains and a global shared state, with those networks interconnected and speaking to each other. One example for that is Avalanche (AVAX), with hundreds of sovereign, corporate-owned chains (called subnets) live but connected to a primary, layer-1 network.

Ethereum’s ether (ETH), in his view, is the bigger but slower bet. Pandl said he believes the market will eventually move toward “global decentralized finance,” but added that “the tech is not fully ready” and that institutions are not ready either.

That makes ETH the more ambitious investment for those willing to wait for the longer-term shift away from financial intermediaries.

There are also picks-and-shovels plays. Pandl highlighted chain-agnostic service providers such as Chainlink as another way to get exposure, saying they may be “even more compelling” than some blockchains.

Read more: How tokenized assets could become a $400 billion market in 2026