Tokenization and the banking system: Redefining authority in the blockchain era

By Alexandru-Ștefan Goghie
Published in: Competition & Change, Vol. 28(5), 2024

I. Introduction: The Paradox of Blockchain and Traditional Power

This paper addresses a compelling paradox in the financial world: while blockchain technology emerged as a challenge to traditional centralized finance—particularly banks—it is now being integrated into banking infrastructures in ways that consolidate, rather than disrupt, their authority. Focusing on tokenization—the process of transforming real-world financial assets into blockchain-based tokens—Goghie explores how banks are strategically using this process not just for modernization but to assert dominance over emerging blockchain infrastructures.

The paper's argument is both theoretical and empirical. Drawing from International Political Economy (IPE) and Science and Technology Studies (STS), it conceptualizes blockchain as a socio-technical infrastructure—one shaped not merely by technology but by power, social interaction, and narrative. The author introduces the concept of “power of social interaction” as a new form of agency, through which banks engage with, appropriate, and reshape blockchain systems to remain central actors in financial governance.

II. Theoretical Framework: Infrastructure and Power as Interaction

a. From Libertarian Origins to Institutional Co-option

Bitcoin, introduced in 2009, marked the genesis of blockchain technology. Designed as a trustless, peer-to-peer currency, Bitcoin challenged the banking system's role as intermediary. However, it was Ethereum, with its Turing-complete smart contract functionality, that catalyzed a more transformative leap—ushering in Decentralized Finance (DeFi). Ethereum's DeFi applications created new financial ecosystems without custodians, clearing houses, or intermediaries, all built on open protocols and decentralized logic.

Despite this, traditional institutions—especially banks—have increasingly inserted themselves into this supposedly disintermediated landscape. The author argues this shift cannot be explained purely by efficiency or cost-saving motivations. Instead, it reflects a strategic power move.

b. Infrastructure as Political and Strategic Arena

Goghie adopts an infrastructural perspective, treating blockchain not just as code or software but as a dynamic socio-technical system. Infrastructure here is relational, evolving through interactions between technical design and human practices. Crucially, it is also political—who builds and controls it determines who has power.

Contrary to claims that infrastructures “don’t do anything per se,” the paper argues that infrastructures actively produce and distribute power by shaping how actors interact, what behaviors are enabled or constrained, and what narratives are institutionalized. Infrastructure development thus becomes a contested site of “infrastructuring”—the continual reworking of infrastructure through overlapping technical, social, and political inputs.

c. Power of Social Interaction

The study reframes financial power away from older models of coercion (e.g. Dahlian power) and toward "power of social interaction", a concept from Duggan et al. (2022). This power is not about domination through force or law, but rather narrative construction, strategic positioning, and relational authority.

Banks leverage their agent-based power—their lobbying capacities, regulatory access, and control over key financial instruments—to influence how blockchain technologies evolve. They shape not only the material structures but the meaning and trajectory of the blockchain infrastructure.

III. Tokenization: Banks' Infrastructural Entry Point

a. Technical Background

Tokenization refers to the creation of blockchain-based digital representations of real-world assets (RWAs), such as bank loans or covered bonds. These assets are encoded as tokens (often ERC-20 on Ethereum), allowing for programmable ownership, instant settlement, and secondary market trading. Initially a DeFi innovation, tokenization has attracted banks’ interest for its potential to enhance liquidity and reduce costs—but more significantly, to recentralize power.

The use of stablecoins like Dai—especially those backed by RWAs—has been a major vector through which banks enter the blockchain space. These instruments allow banks to tokenize collateral and operate within blockchain ecosystems without relinquishing control.

b. Tokenization as Infrastructuring

Tokenization enables banks to co-opt the decentralized ethos of blockchain and reframe it within their own logic of compliance, centralization, and trust. This is a classic case of infrastructuring: banks actively shape the blockchain’s evolution by embedding their practices into its technical and narrative core.

By controlling the assets (e.g., loans, bonds) required for tokenization and aligning blockchain infrastructures with regulatory norms, banks shape not only how the technology is used but what it ultimately becomes.

IV. Empirical Case Studies: HVB and SocGen-Forge

a. Huntington Valley Bank (HVB) and MakerDAO

In 2022, HVB—a regional U.S. bank—partnered with MakerDAO to create a vault for issuing up to $1 billion in Dai, backed by HVB’s commercial loans. Through a Delaware-based trust called the Multi-Bank Participation Trust, HVB participated in a novel form of loan syndication, where it originated loans and offloaded portions to MakerDAO via smart contracts.

This allowed HVB to:

• Expand loan supply by sharing risk with the DeFi community.
• Gain liquidity in the form of Dai.
• Circumvent traditional capital constraints.

Meanwhile, MakerDAO gained exposure to traditional lending markets, earning fees and stabilizing its RWA-backed Dai ecosystem. This case illustrates how banks integrate with DeFi not as passive users but as architects of hybrid infrastructures—designing legal structures, determining eligibility, and shaping terms.

b. Société Générale-Forge (SocGen-Forge)

SocGen-Forge, a digital asset-focused subsidiary of the French banking giant, issued covered bonds tokenized as security tokens on Ethereum. These were used as collateral to borrow Dai from MakerDAO—up to $30 million. SocGen followed stringent regulatory procedures, including daily mark-to-market valuations and overcollateralization with AAA-rated bonds.

This interaction:

• Bridged institutional finance and DeFi.
• Framed tokenization within the logic of compliance and legal safety.
• Signaled to regulators and the market that blockchain could be domesticated.

SocGen’s experience illustrates how banks not only integrate blockchain into their models but set standards for what acceptable blockchain-finance integration looks like—enabling their narrative of safe, regulated, bank-led tokenization to gain prominence.

V. Strategic Implications and Power Narratives

Both cases show that banks are not just adopting new tools—they are reshaping the terrain. Tokenization becomes the “trojan horse” through which banks achieve three goals:

1. Reassert Control: Instead of resisting DeFi, banks incorporate it, using it to strengthen their central role in asset issuance, compliance, and settlement.
2. Set Standards: By integrating their own instruments (loans, covered bonds) as RWAs, banks dictate what forms of tokenization are “legitimate,” crowding out grassroots or anarchic alternatives.
3. Shape Narratives: The original libertarian or crypto-anarchist vision of blockchain is displaced by a collaborative, bank-centric narrative emphasizing compliance, risk management, and interoperability.

The study concludes that infrastructures are not neutral. Their future is shaped by the actors with the strongest agency—in this case, traditional banks—who mold them to align with their institutional interests.

VI. Contribution to IPE and STS Literature

The paper makes three major scholarly contributions:

1. Reframing Blockchain as Infrastructure: Moving beyond technical views of blockchain, it conceptualizes it as a dynamic political and socio-technical infrastructure shaped through conflict and co-production.
2. Introducing Power of Social Interaction: It proposes a new power framework suited to decentralized, fluid ecosystems like DeFi, where power emerges not from fixed hierarchies but relational positioning and interaction.
3. Foregrounding Tokenization in IPE and STS: Tokenization is treated not as a technical afterthought but as a crucial site of financial power politics, where authority is redefined.

VII. Conclusion: Infrastructure as Contestation, Not Disruption

Tokenization marks a pivotal moment in the contest over the future of finance. While it originates from a decentralized impulse, it has become the battleground on which banks reassert their power. By shaping what counts as acceptable blockchain integration, banks re-center themselves within emerging infrastructures.

Thus, blockchain’s potential to radically democratize finance is increasingly absorbed into legacy systems. The shift is not accidental but the result of deliberate infrastructuring, where banks’ agent-based power enables them to dictate standards, manage narratives, and redefine the contours of authority in the blockchain era.

The paper ends with a call for continued critical inquiry into how emerging technologies evolve—not in the abstract, but through struggles over meaning, standards, and control.

You can download the full article by Alexandru here:

https://journals.sagepub.com/doi/10.1177/10245294241258255

Alexandru Stefan Goghie is a PhD candidate in the Department of Political and Social Sciences at Freie Universität Berlin, PhD researcher at JFKI's Graduate School of North American Studies and PhD researcher at Global Climate Forum. His research focuses on geopolitics, the global financial system, monetary policy, and the geopolitics of finance". You can follow him on his Substack https://goghieas.substack.com/