If you were to ask the average financial institution for its current view of onchain finance, the response would likely mirror the experience many users still have in the DeFi space: a clunky interface with unresolved compliance issues that, crucially, lacks confidentiality.
In other words, no matter how fast or efficient blockchain may be, the very idea of handling cross-border payments, institutional settlement or merchant transactions onchain is simply incompatible with the industry’s obligations to protect personally identifiable information (PII), commercially sensitive data, and client confidentiality.
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That perception is nothing new, but it is out of date.
Though antiquated, it’s a view that’s heavily ingrained across the industry and is pushing most financial institutions down one of two paths. They’ve either avoided blockchain infrastructure altogether, continuing to operate under traditional banking systems, which provide the confidentiality institutions require, but remain slow, siloed, and heavily dependent on manual processes and restricted operating hours. Or, they’ve dabbled in private and permissioned blockchain models that offer greater control and privacy, but in creating closed-off networks – otherwise known as “walled gardens” – liquidity, interoperability and scalability are all badly affected.
What’s now emerging, however, is a third route – a true “onchain bank” that makes it possible for institutions to use public blockchain infrastructure without exposing sensitive financial data.
And it’s already being embraced by several major players, including Apex Group; a tier 1 global, single-source financial services provider that services $3.5tn in assets.
Why the “onchain bank” is no longer just theory
So, what’s changed to take the concept of an onchain bank out of the theory zone and into reality – attracting the likes of Apex Group and others?
The topline answer lies in an advanced class of cryptography, Fully Homomorphic Encryption (FHE). FHE enables data processing without decryption; companies provide services without accessing user data, while users experience unchanged functionality. With encryption maintained during both transit and processing, all online activities are truly end-to-end encrypted.
With most FHE technical hurdles having been solved or nearing resolution, and production-ready mainnet infrastructure live as of late 2025, the foundations for onchain banking are already in place. The confidential token standard has also been submitted to the Ethereum Foundation and is being reviewed for adoption.
Taken together, these developments unlock the real value of onchain systems, which is programmability; the ability to embed conditional logic and compliance directly into the transaction layer.
When it comes to compliance specifically, there are many onchain compliance standards, such as the ERC 3643 standard used by T-REX or the CMTA-T standard used by many institutions in Europe. But what they all do is combine identity, compliance rules and settlement in the same transaction.
Imagine an asset issuer, such as a private equity firm: when they launch a new fund, there are rules per jurisdiction that detail who can buy the shares of these funds. If the fund has not filed all the required paperwork in a jurisdiction, its distributors cannot sell these shares in that jurisdiction. Similarly, if a client is not fulfilling all conditions, a distributor is not supposed to transfer these shares to the client. With regulations changing and private equity firms filing for more countries, hundreds of distributors need to be updated continuously, with the asset issuer bearing some liability in case a distributor sells the asset to a client not fulfilling the regulatory conditions.
With onchain compliance, asset issuers just need to update the smart contract and all the rules associated with the tokenised asset are instantly updated. All of which removes the friction that exists today to ensure that compliance is actually enforced.
Moving from ‘proof of concept’ to ‘proof of volume’
Over the next 10 months or so, the focus will be to integrate the confidentiality standard into key players of the blockchain ecosystem to enable a seamless experience: wallets and custody solutions to hold confidential tokens, bridges to move confidential tokens cross chain, analytical tools to enable service providers to stay compliant, and custodians to bring liquidity.
As mentioned, a number of major players are now on board, integrating FHE technology in their systems to fully enable onchain banking – Apex Group being one of them. Having already committed to moving $100bn USD onchain via the T-REX protocol by June 2027, Apex Group’s commitment and integration of FHE with the T-REX standard marks a real turning point from isolated private ledgers to an industrial-grade global infrastructure. It proves that the RWA migration isn’t a future possibility; it’s happening now, and it requires FHE’s confidentiality layer to scale.
What’s more, in most sectors, regulatory alignment is often a hurdle to overcome, but in the case of T-REX, the ERC-3643 standard itself is already widely accepted by regulators as it provides compliance directly in the smart contract and can replicate any existing off-chain regulation.
Once T-REX goes into production, the last hurdle to overcome would be liquidity and access to secondary markets. But, because Apex Group has already committed to tokenising so much and will integrate its IT systems directly into T-REX, the project has a tremendous advantage compared to other projects that need to bootstrap their first hundred million.
“Adapt or die”
There is no doubt that onchain finance is already a powerful rail that all future financial systems will connect to eventually. Over time, more and more banks and payment providers will integrate blockchain infrastructure behind the scenes, often without end-users even realising it, to power services such as 24/7 access to liquidity when trading or lending.
But as of right now, as we embark on the beginning stages of what will be a huge change, we’re seeing many institutions ignore the disruption – as is often the case when any technical innovation disrupts a market.
Soon, however, they will face an “adapt or die” situation that quickly moves the technology from a handful of early adopters to the mainstream. When competitors realise that these innovation leaders can offer unique services to their clients at very competitive prices, they too will follow.
Think of it this way: If you have two financial assets with equivalent profiles, would you rather buy the asset that can easily and cheaply be traded and/or used as collateral when borrowing money, or would you stick to the old-fashioned asset? For the clients of these financial institutions, it will be a no-brainer,
Over the next decade, programmable confidentiality will allow the world’s $100tn in tokenised real-world assets to migrate to public rails. This will create a unified liquidity layer where regulated institutions can trade with total discretion and atomic settlement. New asset classes are likely to emerge, and capital will be able to flow more freely.
The end result will be a financial system where money never has to sit still. By moving away from slow, manual paperwork and multi-day waiting periods, capital will move across the globe and between different assets instantly.
In ten years, we won’t distinguish between “digital” and “traditional” finance; it will all just be one efficient system.
Ghazi Ben Amor, SVP of Corporate Development at Zama
