As institutional adoption of digital assets accelerates, the focus is shifting toward building the infrastructure needed to support interaction between traditional and blockchain-based markets. Traders Magazine spoke with Justin Chapman, Global Head of Strategic Partnerships for Digital Assets and Financial Markets at Northern Trust, about where momentum is building, the rise of digital cash rails, and how partnerships with Digital Asset Holdings and the Canton Network signal the next phase of institutional adoption.

Where are you seeing the strongest momentum today in institutional digital assets markets and why?

Our clients are increasingly interested in market infrastructure that will enable investing in digital assets alongside allocations to more traditional asset classes such as equities, fixed income, alternatives and private assets. As a result, they are looking to us to provide market access support and holistic solutions across the entire spectrum of investment types and markets

Digital cash rails show the strongest momentum because they solve the institutional “cash leg” of digital asset and 24/7 market activity. Connecting clients to always-on, programmable cash movement enables faster funding and settlement across nights and weekends, reduces operational friction and counterparty/settlement risk, and makes it easier to move liquidity seamlessly between traditional and digital markets.

How is the relationship between traditional financial infrastructure and digital asset markets evolving as banks, custodians, and exchanges become more active in the space?

Traditional markets and digital markets will co-exist and many of our clients will hold both asset types. As a result, we believe providing and managing access to the markets, especially as those markets become more available on nights and weekends, should be viewed holistically and could become a key differentiator.

Recent announcements by organizations such as DTCC and Nasdaq reinforce our view that qualified custody on-chain is likely to be an important market capability. While participation in specific initiatives will be evaluated case by case, being an on-chain custodian places Northern Trust in the right position to support those opportunities as they develop. While on-chain custody brings higher regulatory and operational complexity, it also places Northern Trust at the center of institutional adoption as digital asset markets mature.

What are the biggest barriers still preventing wider institutional adoption of tokenized assets and blockchain-based market infrastructure?

Two of the biggest barriers to wider institutional adoption remain the lack of common, defined regulatory frameworks and liquidity in the marketplace. We are seeing the regulatory barrier starting to come down.  With digital asset market structure legislation being discussed and implemented in various regions, such as the UK and US, we are being presented with more clearly defined guidelines and frameworks to build controls to. By aligning frameworks to those for existing asset types, there is a path being created to further connect these marketplaces.

Liquidity in the marketplace requires more work to be done around not only providing interoperability between blockchains, but also between these products listed on both traditional and digital markets, allowing for a more complete order flow capability.

Northern Trust recently announced its work with Digital Asset Holdings and the Canton Network. What does that partnership signal about where institutional demand for tokenized asset custody and servicing is heading?

We are connecting to these digital markets to ensure Northern Trust is positioned to support institutional clients as tokenized markets begin to scale. Canton and other blockchains are attracting regulated financial market utilities, issuers, and counterparties, and early integration allows us to extend custody and asset servicing into those environments while maintaining our institutional standards for control, risk, and governance.

What does institutional-grade custody look like in the digital asset era, and how are expectations around risk management, reporting, and compliance changing?

Institutional-grade custody in the digital asset era requires control, safekeeping, liability and investor protection for client assets — that remains a constant. However, more is being asked of custodians to provide connectivity and accessibility to these products, to allow clients to participate in both traditional and digital environments while enabling a common view into client portfolios regardless of the underlying environment for their investments. The key to providing this lies in the integration of the digital architecture with the traditional architecture to capture data from all key sources and report them back in a common format while enforcing internal controls.

Common controls across traditional and digital infrastructures include integration with established compliance and risk frameworks such as anti-money laundering (AML) and Office of Foreign Assets Control (OFAC), alongside institutional-grade security, governance, and operational resilience. Digital asset capabilities are embedded within Northern Trust’s existing custody, servicing, and reporting platforms, enabling consistent controls across asset types. This allows clients to manage digital and traditional assets side by side with the same standards for safekeeping, diligence, and market access. As market practices evolve, these shared controls ensure continuity, security, and regulatory alignment across both environments.

Looking three to five years ahead, which parts of capital markets do you think are most likely to be transformed first by digital asset technology, and which areas may be slower to change?

Markets that are most likely to be transformed are those where liquidity and accessibility are the most limited. The ability to unlock trapped liquidity should drive investors to new investment opportunities. Those markets and providers that are able to connect order flow and bring fragmented liquidity pools together between traditional and digital marketplaces will be the ones that we expect to experience the largest transformation.