Private markets are having a moment. Once the province of a small circle of institutional investors bound to rigid, closed-end fund structures, private capital has grown into one of the most important engines of financing in the global economy. Yet, according to a new BNY Institute paper, “A New Architecture: Accelerating Private Market Growth,” the systems that keep this asset class running have not kept pace with its success. Unless that changes, the friction baked into today’s infrastructure will become the biggest constraint on tomorrow’s growth.

According to Chief Product and Innovation Officer Carolyn Weinberg, “BNY wants to modernize the life cycle of investment assets.” As Weinberg explained to me in an interview, “modernizing the private markets’ infrastructure can improve investment access to institutional investors as well as to individuals.”

An Asset Class Bigger Than Its Own Wiring

The numbers behind this boom are hard to ignore. Semi-liquid and evergreen vehicles — the products wealth and advisor channels have used to bring private markets to a much broader investor base — have more than doubled in assets under management since 2022, crossing $500 billion by September 2025. Private credit tells a similar story at a larger scale. “The private credit market is already quite large, about $1.7 trillion,” said Weinberg. “When you map out data in a transformative way and extract information using blockchain technology for regular assets, we can enable a lot for different investor profiles.”

A category once limited to roughly $1.7 trillion in middle-market sponsor lending is now viewed as having an addressable market approaching $40 trillion once investment-grade assets and other income-generating strategies are counted. The asset class itself has broadened well beyond traditional corporate loans to include fund finance, supply chain and equipment finance, aviation and real estate debt, residential mortgages, infrastructure loans, and even music royalties.

None of that growth means much, though, if the back office cannot support it. Asset servicing, cash movement, collateral pledging, and ownership records are still scattered across a patchwork of intermediaries, legal agreements, and disconnected platforms. Subscriptions, redemptions, capital calls, and secondary transfers often depend on manual, sequential handoffs between parties — a process so unautomated that trade settlement for private credit can stretch up to 30 business days. As more capital and more participants flow into the ecosystem, that fragmentation stops being a minor inconvenience and starts acting as a genuine bottleneck on scale.

The BNY Institute report frames this as more than a temporary growing pain. It is a structural shift in how capital markets work: Private and public holdings increasingly sit inside the same portfolios, and investors are starting to treat them as one unified book of business rather than two separate worlds. That blurring of the line raises the bar considerably for the infrastructure connecting them, which now needs far more scale, standardization, and interoperability than it was ever built to deliver.

Four Pillars for a Ground-Up Rebuild

Rather than patching individual systems, the BNY Institute argues the industry needs a foundational redesign built around four pillars.

Persistent identifiers come first. Public markets have long relied on standardized identifiers like CUSIPs and ISINs to track assets instantly across exchanges and custodians. Private markets have no real equivalent — ownership records, servicing data, and transaction histories are scattered across counterparties, administrators, and internal spreadsheets, making it nearly impossible to get one clean, current view of an asset. Digitizing ownership-level data at the asset level would create a single source of truth, support real-time ownership tracking, and produce more consistent records across servicing, transfers, and valuation — while also strengthening auditability. The philosophy behind this pillar is a mindset shift: data stops being a reporting byproduct and becomes shared infrastructure the whole market runs on. “Identifiers are very important,” emphasized Weinberg. “Without identifiers, it is very hard to invest. Streamlining will also help with liquidity. Investors prefer assets that can settle.”

Structured terms and programmable cash flow logic is the second pillar. Private credit agreements are dense, bespoke documents full of side letters and covenant structures that aren't machine-readable today. AI and generative language models can extract the key legal and economic terms from these agreements and translate them into smart contracts, making features like amortization schedules, floating rates, payment-in-kind options, and fee distributions fully programmable — effectively letting the loan verify its own eligibility and calculate distributions on its own.

Certainty of asset servicing and settlement is the third. Tokenization paired with smart contracts enables delivery-versus-payment settlement, where ownership transfer and cash movement happen simultaneously and atomically, eliminating the lags and cash breaks that plague manual processes today. Compliance checks — KYC/AML, transfer restrictions — can be embedded directly into the tokens themselves.

Collateral utility and intelligent financing rounds out the framework. Once an asset has a persistent identifier, programmable terms, and settlement certainty, it can finally be pledged and leveraged efficiently — something illiquidity has historically prevented in private credit. Integrated with tokenized cash and digital Treasury instruments, this opens the door to extended-hours liquidity and dynamic, cross-venue collateral optimization.

Why Tokenization Needs a Network to Matter

A recurring theme in the BNY Institute white paper is that tokenizing an asset is only valuable if the token can actually move. Interoperability — the ability to shift tokenized assets, cash, and data across custody platforms, fund administrators, triparty collateral venues, blockchains, and reporting tools — is what determines whether tokenization becomes real infrastructure or just another disconnected pilot program.

Weinberg makes the point directly: Tokenization is a full lifecycle transformation, not a technical upgrade, and its real value lies in turning manual, fragmented processes into automated, always-on infrastructure. Without an interoperable layer, the report warns, digital rails risk simply reproducing the same old fragmentation in a new form.

To illustrate what this looks like in practice, the report walks through a private credit loan moving through six connected stages — Create, Deploy, Distribute, Transact, Administer, and Report — each step running on a shared digital thread instead of a series of disconnected handoffs, from origination through final reporting.

Financial Institutions and Private Markets Infrastructure

Reading the whitepaper led me to look at other financial institutions and their efforts in modernizing private market infrastructure. Though Project Guardian, J.P. Morgan and Apollo have tested an infrastructure architecture in which tokenization and smart contracts could automate:

• subscriptions
• redemptions
• portfolio rebalancing
• customized portfolios
• interoperability between platforms
• investment in traditional and alternative funds

Citibank has gone even further into tokenized private assets.

Citi has worked with Wellington, WisdomTree and DTCC Digital Assets on a proof of concept demonstrating how private assets could be tokenized and given new capabilities through smart contracts.

Last year, Citi partnered with SDX, a regulated digital securities infrastructure provider, to develop a solution for:

• tokenization
• settlement
• custody
• liquidity management
• private-market shares

The proposed architecture uses SDX's blockchain-based CSD infrastructure while Citi acts as custodian and tokenization agent.

State Street, BNY’s significant competitor has Alpha for Private Markets. It was designed to manage infrastructure, private equity, real estate and private debt through an integrated front-to-back platform.

State Street describes the platform as providing:

• unified public/private portfolio views
• cloud-based asset-management tools
• risk forecasting
• scenario analysis
• integration with liquidity venues
• private-market data management