Tokenized real-world assets (RWAs) — digital representations of physical or financial assets on a blockchain — are gaining traction as a mechanism to connect traditional finance with decentralised liquidity. This analysis examines the current state of the market, the commercial drivers, the risks and the outlook for institutional adoption.
What Changed
The concept of tokenising assets such as real estate, bonds, commodities and private credit is not new, but the past 18 months have seen a shift from experimental projects to institutional-grade infrastructure. Major financial institutions, including BlackRock, JPMorgan and Goldman Sachs, have launched or expanded tokenisation initiatives. BlackRock’s BUIDL fund, a tokenised money market fund launched in March 2024 on the Ethereum network, has attracted over $500 million in assets under management within its first year, according to public blockchain data and fund disclosures. JPMorgan’s Tokenized Collateral Network (TCN) has processed billions of dollars in intraday repo transactions since its 2023 pilot. Goldman Sachs has been active in tokenising bonds and is exploring broader RWA platforms.
Simultaneously, the decentralised finance (DeFi) ecosystem has built infrastructure to accommodate RWAs. Protocols such as Ondo Finance, Centrifuge and Maple Finance now offer tokenised versions of US Treasuries, private credit and other assets. The total value locked in RWA-focused DeFi protocols has grown from under $2 billion in early 2023 to over $8 billion by late 2024, according to data from DeFi Llama and RWA.xyz. This growth reflects both genuine demand and the maturation of the technology stack, including oracles, custody solutions and compliance frameworks.
Regulatory developments have also contributed. The European Union’s Markets in Crypto-Assets (MiCA) regulation, which came into full effect in December 2024, provides a clear legal framework for tokenised assets, including stablecoins and asset-referenced tokens. In the United States, the Securities and Exchange Commission has signalled a more accommodating stance under its current leadership, approving several tokenised fund structures. The UK’s Financial Conduct Authority has launched a sandbox for digital securities, and Singapore’s Monetary Authority continues to support tokenisation pilots through Project Guardian.
Why It Matters
Tokenised RWAs matter because they address a structural inefficiency in global capital markets. Traditional financial assets are often illiquid, subject to lengthy settlement cycles and accessible only to institutional or accredited investors. By representing these assets on programmable blockchains, tokenisation can reduce settlement times from days to minutes, lower transaction costs through automation and enable fractional ownership that opens markets to a broader investor base.
For institutional investors, tokenised RWAs offer a way to deploy capital into familiar asset classes — such as government bonds, private credit or real estate — while gaining the operational benefits of blockchain infrastructure. For DeFi protocols, RWAs provide a source of yield that is uncorrelated with crypto-native volatility, potentially stabilising lending markets and attracting risk-averse capital. The convergence of these two worlds could create a more efficient, transparent and accessible financial system.
Commercial Impact
The commercial implications are significant across several sectors:
Asset managers and issuers. Tokenisation reduces the cost of issuing, distributing and servicing financial instruments. BlackRock’s BUIDL fund, for example, uses smart contracts to automate dividend distributions and allow near-instant transfers between investors. This could compress fee structures and force traditional asset managers to adapt or lose market share.
Custodians and infrastructure providers. The need for secure, regulated custody of both the underlying assets and the digital tokens creates a new revenue stream for custodians such as BNY Mellon, State Street and Coinbase. These firms are investing in technology to support tokenised assets, including multi-party computation wallets and blockchain node infrastructure.
Exchanges and trading venues. Secondary trading of tokenised assets could generate significant volumes. 24/7 settlement and atomic swaps reduce counterparty risk and free up capital. Exchanges such as the London Stock Exchange and Deutsche Börse are exploring digital asset trading platforms, while decentralised exchanges like Uniswap and Curve are already listing tokenised funds.
Lending and credit markets. Tokenised private credit allows borrowers to access capital from a global pool of lenders, bypassing traditional intermediaries. Maple Finance and Centrifuge have originated over $1 billion in loans backed by real-world collateral, including invoices, mortgages and aircraft leases. The efficiency gains could lower borrowing costs and increase credit availability for small and medium enterprises.
Real estate and infrastructure. Fractional ownership of commercial real estate, renewable energy projects and infrastructure assets could unlock liquidity in markets that are traditionally illiquid. Platforms such as RealT and Tangible are already tokenising individual properties, though volumes remain small relative to the total addressable market.
Risks / Unknowns
Despite the momentum, several risks and unknowns remain:
Regulatory fragmentation. While MiCA provides clarity in Europe, the regulatory landscape in the United States, Asia and other regions remains inconsistent. Tokenised assets may be classified as securities, commodities or something else depending on jurisdiction, creating compliance complexity for cross-border issuers and investors.
Custody and legal enforceability. The legal status of tokenised assets is still being tested. If a custodian fails or a smart contract is exploited, the legal recourse for token holders may be unclear. The enforceability of tokenised ownership rights in bankruptcy proceedings has not been fully established.
Valuation and oracle risk. Many RWAs require reliable price feeds to function in DeFi protocols. If the oracle providing the price of a tokenised bond or property fails or is manipulated, the entire lending market built on that asset could collapse. This risk is amplified for illiquid or infrequently traded assets.
Smart contract risk. Tokenised assets rely on smart contracts that may contain bugs or vulnerabilities. The 2023 exploit of the Mango Markets protocol, which resulted in losses of over $100 million, illustrates the potential for catastrophic failure in DeFi lending markets. While institutional-grade audits and insurance can mitigate this risk, it cannot be eliminated.
Adoption inertia. Traditional financial institutions are cautious. Many are still evaluating the technology and waiting for clearer regulatory guidance, proven track records and standardised infrastructure. The pace of adoption may be slower than optimists expect.
FY Outlook
Over the next 12 to 24 months, we expect tokenised RWAs to continue their growth trajectory, driven by institutional pilots, regulatory clarity in key jurisdictions and the expansion of DeFi infrastructure. The total market capitalisation of tokenised assets (excluding stablecoins) could reach $50 billion by the end of 2026, up from approximately $15 billion today, according to estimates from several industry research firms. This growth will likely be concentrated in tokenised government securities, private credit and real estate.
The most significant catalyst would be the launch of a tokenised version of a major bond index or exchange-traded fund by a large asset manager, which could trigger a wave of institutional adoption. Conversely, a major regulatory setback or a high-profile smart contract exploit could slow momentum.
In the longer term, tokenised RWAs have the potential to reshape the structure of global capital markets. If the technology matures and regulatory frameworks converge, the distinction between traditional finance and DeFi may blur, creating a hybrid system that combines the best of both worlds: the security and compliance of traditional finance with the efficiency and programmability of blockchain.
Conclusion
Tokenised real-world assets represent a credible institutional bridge between traditional finance and blockchain liquidity. The market is moving from experimentation to production, driven by major financial institutions, supportive regulation and maturing infrastructure. However, significant risks remain, including regulatory fragmentation, custody uncertainty and smart contract vulnerabilities. For founders, operators and investors, the opportunity lies in building the infrastructure, products and services that will enable this transition, while carefully managing the risks. The next two years will be critical in determining whether tokenised RWAs become a mainstream asset class or remain a niche experiment.
