Deep dive: Tokenization & real-world assets (RWAs) — what's working, what's not, and what's next

The tokenization of real-world assets has reached a critical inflection point: by late 2025, the total value locked in tokenized RWAs exceeded $12 billion, representing a 340% increase from 2023 levels. Yet beneath these headline figures lies a more nuanced reality—one where incentive design failures, regulatory fragmentation, and measurement challenges continue to separate successful implementations from expensive experiments. This deep dive examines what's actually working in RWA tokenization, what isn't, and where the sustainable value creation opportunities genuinely exist.

Why It Matters

The tokenization of real-world assets represents one of the most consequential intersections of blockchain technology and the physical economy. At its core, RWA tokenization promises to unlock liquidity in traditionally illiquid markets, democratize access to investment opportunities, and create transparent, auditable chains of custody for everything from carbon credits to commercial real estate.

The 2024-2025 period has been particularly transformative. According to Boston Consulting Group, the tokenized asset market is projected to reach $16 trillion by 2030, with institutional adoption accelerating rapidly. BlackRock's BUIDL fund, launched in March 2024, accumulated over $500 million in assets within its first six months, signaling mainstream financial acceptance. Meanwhile, the tokenized U.S. Treasury market grew from approximately $100 million in early 2023 to over $2.5 billion by the end of 2025.

From a sustainability perspective, RWA tokenization offers unique advantages. Tokenized carbon credits can carry embedded lifecycle assessment (LCA) data, enabling buyers to verify the provenance and additionality of their environmental investments. Real estate tokens can incorporate energy performance certificates directly into smart contracts, creating incentive mechanisms for green building improvements. Agricultural commodity tokens can encode regenerative farming practices, connecting sustainable producers directly with conscious consumers.

However, the sustainability potential of RWA tokenization remains largely unrealized. Current implementations focus predominantly on financial optimization—reducing settlement times, lowering transaction costs, and expanding investor access—rather than embedding genuine environmental or social accountability into token structures. The regulatory surface area has expanded dramatically, with the EU's Markets in Crypto-Assets (MiCA) regulation, Singapore's Payment Services Act amendments, and the SEC's evolving stance on digital securities creating a complex compliance landscape that favors well-capitalized incumbents over sustainability-focused innovators.

The fundamental question facing the sector is whether tokenization will democratize sustainable finance or simply digitize existing inequities with a blockchain veneer.

Key Concepts

Understanding RWA tokenization requires familiarity with several interconnected concepts that span technology, finance, and environmental accounting.

Tokenization refers to the process of representing ownership rights to a real-world asset as a digital token on a blockchain or distributed ledger. Unlike cryptocurrencies, which are native digital assets, tokenized RWAs maintain a connection to off-chain assets through legal structures, custody arrangements, and oracle systems. The token itself is a programmable container that can encode ownership percentages, dividend distributions, voting rights, and—critically for sustainability applications—environmental attributes.

Real-World Assets (RWAs) encompass any tangible or intangible asset that exists outside the blockchain environment. This includes real estate, commodities, art, intellectual property, carbon credits, renewable energy certificates, and increasingly, natural capital assets like biodiversity credits and water rights. The challenge with RWAs is that blockchain technology can only provide guarantees about on-chain data; the connection to physical reality requires trusted intermediaries, legal frameworks, and robust verification mechanisms.

Smart Contracts are self-executing programs stored on blockchain networks that automatically enforce the terms of agreements when predetermined conditions are met. In RWA tokenization, smart contracts govern token transfers, dividend distributions, compliance checks, and—in more sophisticated implementations—automated environmental reporting. The immutability of smart contracts provides auditability but also creates risks when bugs or changing circumstances require contract modifications.

Proof-of-Reserves (PoR) mechanisms provide cryptographic attestation that a token issuer actually holds the underlying assets they claim to represent. Following the collapse of FTX and other crypto entities, PoR has become essential for institutional trust. Advanced implementations combine on-chain attestations with third-party audits, IoT sensor data, and satellite verification for physical assets. For sustainability applications, PoR extends to proving that environmental claims—such as carbon sequestration or renewable energy generation—are actually occurring.

Lifecycle Assessment (LCA) is a methodology for evaluating the environmental impacts associated with all stages of a product's life, from raw material extraction through processing, manufacture, distribution, use, and end-of-life treatment. When integrated with tokenization, LCA data can be embedded directly into asset tokens, enabling automated verification of environmental claims and creating unprecedented transparency in sustainable supply chains. The ISO 14040 and 14044 standards provide the framework, while blockchain integration enables real-time updates and immutable record-keeping.

What's Working and What Isn't

What's Working

Tokenized Treasuries and Yield-Bearing Stablecoins

The tokenization of U.S. Treasury securities has emerged as the clearest product-market fit in the RWA space. Protocols like Ondo Finance, Mountain Protocol, and Maple Finance have successfully bridged traditional fixed-income markets with DeFi infrastructure. By late 2025, tokenized Treasury products offered yields exceeding 5%, with near-instant settlement and 24/7 trading availability. The success stems from several factors: Treasuries are standardized, highly liquid, and carry minimal counterparty risk. The legal structures are well-understood, and the demand from crypto-native institutions seeking yield without smart contract risk is substantial.

For sustainability applications, this infrastructure creates the foundation for tokenized green bonds. The European Investment Bank's digital bond issuance on Ethereum demonstrated that sovereign and supranational green debt can leverage blockchain efficiency while maintaining compliance with established green bond frameworks.

Real Estate Fractional Ownership

Real estate tokenization has achieved meaningful traction, particularly for commercial properties in established markets. RealT in the United States has tokenized over $100 million in residential properties, enabling investors to purchase fractional ownership with minimums as low as $50. Propy has facilitated fully on-chain real estate transactions in multiple jurisdictions. The incentive design works because property owners gain access to broader capital markets, while investors receive exposure to real estate yields previously accessible only to institutional players.

The sustainability angle is emerging through green-certified property tokens. Buildings with LEED or BREEAM certifications can command premium valuations in tokenized form, with smart contracts automatically distributing rental income premiums associated with energy efficiency. Early data suggests tokenized green buildings trade at 3-5% yield premiums compared to conventional properties.

Carbon Credit and Environmental Attribute Tokenization

The tokenization of carbon credits through platforms like Toucan Protocol and KlimaDAO demonstrated both the potential and pitfalls of environmental asset tokenization. While early implementations faced criticism for lacking verification rigor, the market has matured significantly. Current best practices involve integration with established registries (Verra, Gold Standard), real-time monitoring through IoT and satellite data, and smart contract-enforced retirement mechanisms that prevent double-counting.

By 2025, over 25 million tonnes of CO2 equivalent had been retired on-chain, with transparent tracking from origination to retirement. Projects like Regen Network are going further, tokenizing regenerative agriculture outcomes with soil carbon verification backed by scientific measurement protocols.

What Isn't Working

Regulatory Arbitrage Strategies

Early RWA tokenization efforts frequently relied on regulatory arbitrage—structuring tokens to avoid securities classification or operating from permissive jurisdictions to serve global markets. This approach has proven unsustainable. The SEC's enforcement actions against Paxos over BUSD and ongoing investigations into multiple stablecoin issuers demonstrate that regulators are increasingly willing to assert jurisdiction over tokenized assets.

The cost of regulatory uncertainty is substantial. Legal opinions, compliance infrastructure, and ongoing regulatory engagement consume 15-25% of operational budgets for legitimate RWA platforms. Projects that skipped this investment face existential risks as enforcement intensifies.

Complex Incentive Structures Without Economic Sustainability

Many RWA protocols launched with elaborate token incentive mechanisms—governance tokens, liquidity mining rewards, staking bonuses—that proved economically unsustainable. The collapse of TerraUSD demonstrated the extreme case, but more subtle failures are common. Protocols that subsidized adoption through inflationary tokenomics found that users departed when incentives declined.

Sustainable RWA tokenization requires that the underlying assets generate genuine economic value. Yield must come from real cash flows—rent, interest, royalties—not from token inflation or speculative trading. Projects that recognized this early, like Centrifuge with its focus on real revenue-generating credit facilities, have demonstrated more durable adoption.

Inadequate Oracle and Verification Infrastructure

The "oracle problem"—how to reliably bring off-chain data onto blockchain networks—remains partially unsolved for complex RWAs. While Chainlink and other oracle providers offer robust price feeds for liquid assets, the verification of physical asset conditions, environmental outcomes, and legal status remains challenging.

Failed tokenization attempts frequently trace back to oracle inadequacy. A tokenized warehouse needs verified inventory levels; a carbon credit needs confirmed sequestration; a real estate token needs current occupancy data. Building this infrastructure is expensive, and many projects underinvested in verification systems that could withstand adversarial conditions.

Key Players

Established Leaders

BlackRock entered RWA tokenization definitively with the BUIDL (BlackRock USD Institutional Digital Liquidity) fund, a tokenized money market fund on Ethereum. With BlackRock's $10 trillion in assets under management, their participation signals mainstream institutional acceptance and has accelerated regulatory clarity discussions.

JPMorgan Chase operates Onyx, its blockchain platform for wholesale payments and tokenized assets. The Tokenized Collateral Network enables clients to pledge tokenized assets as collateral for OTC derivatives trades, demonstrating enterprise-grade RWA infrastructure.

Securitize provides end-to-end infrastructure for issuing and managing tokenized securities. The platform has facilitated over $1 billion in tokenized offerings, with clients including KKR, Hamilton Lane, and the Avalanche Foundation.

Centrifuge pioneered the tokenization of real-world credit assets, enabling small and medium enterprises to access DeFi liquidity. Their integration with MakerDAO brought institutional-grade credit facilities on-chain, with over $300 million in active financing.

Franklin Templeton launched one of the first tokenized money market funds registered under U.S. securities law, the Franklin OnChain U.S. Government Money Fund, operating on Stellar and Polygon networks with over $400 million in assets.

Emerging Startups

Maple Finance focuses on institutional lending, providing under-collateralized loans to crypto-native institutions and increasingly to traditional businesses. Their credit underwriting infrastructure bridges DeFi yields with real-world borrower assessment.

Goldfinch Protocol enables crypto lending to businesses in emerging markets without requiring crypto collateral. Their unique "trust through consensus" model uses human auditors to verify borrower creditworthiness, expanding access to credit in underserved markets.

Regen Network tokenizes ecological assets, including carbon credits and biodiversity outcomes, with rigorous scientific verification methodologies. Their approach embeds LCA data directly into token metadata.

Homebase democratizes real estate investment through tokenization, enabling fractional ownership of residential properties with regulatory-compliant structures and integrated property management.

Backed Finance issues fully-backed tokenized securities that track traditional assets, providing on-chain access to conventional investment products with Swiss regulatory compliance.

Key Investors & Funders

Andreessen Horowitz (a16z) has deployed substantial capital into RWA infrastructure through its crypto funds, including investments in Centrifuge, Goldfinch, and numerous enabling technologies.

Polychain Capital focuses on blockchain infrastructure with significant RWA exposure, backing projects that bridge traditional finance with decentralized systems.

Coinbase Ventures invests across the crypto ecosystem, with particular emphasis on regulatory-compliant RWA solutions that could integrate with Coinbase's institutional services.

Circle Ventures supports projects that expand USDC utility, including RWA platforms that use Circle's stablecoin for settlement and yield distribution.

Singapore's Monetary Authority (MAS) through Project Guardian has collaborated with multiple financial institutions to pilot tokenized bonds and structured products, providing regulatory sandbox support for institutional RWA experimentation.

Examples

1. Singapore's Project Guardian: Institutional-Grade Tokenized Green Bonds

The Monetary Authority of Singapore's Project Guardian brought together DBS Bank, JPMorgan, and SBI Digital Asset Holdings to pilot tokenized green bonds on a public blockchain. The initiative successfully executed trades of tokenized Singapore Government Securities and Japanese Government Bonds, with automated FX settlement through smart contracts. The green bond pilot embedded environmental use-of-proceeds verification directly into token metadata, enabling real-time tracking of fund allocation to eligible green projects. Transaction settlement times dropped from T+2 to near-instantaneous, while maintaining full regulatory compliance. The pilot demonstrated that institutional-grade RWA tokenization is technically feasible and regulatory-compatible, with the MAS subsequently publishing frameworks for broader implementation.

2. Amazon Rainforest Tokenization: Single Earth's Natural Capital Approach

Single Earth, an Estonian startup, has tokenized over 100,000 hectares of Estonian forests and is expanding to tropical ecosystems including Amazon-adjacent territories. Their MERIT token represents verified carbon sequestration and biodiversity preservation, with pricing derived from scientific models incorporating satellite monitoring, ground-truth verification, and ecological modeling. Landowners receive ongoing yield for maintaining forest cover rather than converting to agriculture or development. By late 2025, the platform had prevented an estimated 2 million tonnes of CO2 emissions while providing landowners with sustainable income streams. The model demonstrates that tokenization can align economic incentives with conservation outcomes, though scalability challenges remain around verification costs and oracle reliability in remote areas.

3. Centrifuge and MakerDAO: Bridging DeFi to Real Economy Credit

Centrifuge's integration with MakerDAO enabled traditional businesses to access decentralized liquidity by tokenizing their receivables and real-world assets as collateral. Companies like New Silver (a fix-and-flip lender) and BlockTower Credit have originated over $300 million in loans through this infrastructure. The system works by creating asset pools where real-world loans are tokenized, with senior and junior tranches offering different risk-return profiles. DAI (MakerDAO's stablecoin) is minted against these real-world asset pools, creating a direct bridge between DeFi capital and productive economic activity. Default rates have remained below 2%, demonstrating that credit underwriting can function effectively in tokenized structures when combined with traditional due diligence.

Action Checklist

• Conduct jurisdictional analysis to identify regulatory requirements across target markets before designing token structures
• Establish legal frameworks connecting on-chain tokens to off-chain asset rights, including custody arrangements and enforcement mechanisms
• Implement proof-of-reserves infrastructure with third-party attestation and real-time monitoring capabilities
• Design tokenomics that derive value from underlying asset cash flows rather than inflationary incentive mechanisms
• Integrate LCA data collection into operational processes for assets with environmental claims
• Build oracle infrastructure appropriate to asset complexity, including IoT sensors, satellite feeds, and human verification networks as needed
• Develop compliance workflows for KYC/AML that balance regulatory requirements with user experience
• Create transparent reporting dashboards showing asset performance, verification status, and regulatory compliance
• Establish governance mechanisms for handling exceptional situations, including smart contract upgrades and dispute resolution
• Plan for regulatory evolution by building modular compliance systems that can adapt to new requirements

FAQ

Q: How do tokenized RWAs differ from traditional securities, and does this distinction matter for sustainability applications? A: Tokenized RWAs are digital representations of ownership rights to real-world assets, recorded on blockchain networks rather than traditional securities infrastructure. The key differences lie in settlement speed (near-instant vs. T+2), fractional ownership capabilities (enabling smaller minimum investments), programmability (smart contracts can automate distributions and compliance), and transparency (blockchain records are publicly auditable). For sustainability applications, these differences enable embedding environmental verification directly into token structures, automating carbon credit retirement, and creating transparent chains of custody for ethical supply chains. However, the regulatory classification in most jurisdictions treats tokenized assets similarly to traditional securities, requiring registration, disclosure, and investor protection compliance regardless of technological implementation.

Q: What are the primary risks associated with RWA tokenization, and how are leading projects mitigating them? A: The primary risks include counterparty risk (the issuer may fail to honor obligations), custody risk (assets may be lost or misappropriated), oracle risk (off-chain data may be inaccurate or manipulated), smart contract risk (code bugs may cause unintended behavior), and regulatory risk (changing laws may affect token legality). Leading projects mitigate these through multiple mechanisms: third-party custody with insurance coverage, multiple independent oracle sources with outlier detection, smart contract audits by reputable security firms, legal structures that ensure token holders have enforceable claims, and proactive regulatory engagement. For sustainability-focused RWAs, additional risks around environmental verification are addressed through scientific methodology standardization, remote sensing integration, and third-party certification partnerships.

Q: How does regulatory fragmentation affect global RWA tokenization initiatives? A: Regulatory fragmentation creates significant operational complexity for RWA tokenization. The EU's MiCA regulation provides the most comprehensive framework for crypto-assets, including specific provisions for asset-referenced tokens. Singapore's regulatory sandbox approach enables experimentation with clear guardrails. The United States remains fragmented between SEC, CFTC, and state-level regulation, creating uncertainty. This fragmentation means projects often must choose between limiting geographic reach or building multiple compliance infrastructures. For sustainability applications, this is particularly challenging because environmental assets often cross jurisdictions—a rainforest carbon credit may be issued in Brazil, tokenized on infrastructure operated in Singapore, and purchased by European investors. Interoperability standards and regulatory mutual recognition agreements are emerging but remain early-stage.

Q: What measurable outcomes distinguish successful RWA tokenization projects from failures? A: Successful RWA tokenization projects demonstrate several measurable outcomes: sustained transaction volume without artificial incentives, secondary market liquidity (bid-ask spreads <5% for liquid tokens), low default rates compared to traditional equivalents (where applicable), growing Total Value Locked (TVL) from organic demand, regulatory compliance maintenance across target jurisdictions, and positive unit economics (revenue exceeding operational costs). For sustainability-focused projects, additional success metrics include verified environmental outcomes (tonnes CO2 sequestered, hectares protected, clean energy generated), LCA data quality scores, and adoption by institutional buyers with genuine sustainability mandates rather than speculative traders. Failed projects typically show declining TVL, dependence on unsustainable incentive programs, regulatory enforcement actions, or discovered fraud in underlying assets.

Q: What is the future trajectory for RWA tokenization in sustainable finance? A: The next phase of RWA tokenization in sustainable finance will likely focus on three areas. First, standardization of environmental data schemas will enable interoperability between platforms and integration with traditional ESG reporting frameworks. Second, regulatory clarity, particularly in the EU with MiCA implementation and emerging frameworks in Asia, will reduce compliance costs and enable institutional participation at scale. Third, infrastructure maturation—including improved oracle networks, cross-chain bridges, and custody solutions—will reduce technical risks. The convergence of carbon markets regulation (EU CBAM, Article 6 implementations), sustainable finance disclosure requirements (SFDR, ISSB standards), and blockchain infrastructure creates conditions for tokenization to become the default infrastructure for environmental attribute tracking. Success will ultimately depend on whether tokenized sustainable assets can demonstrate measurably superior transparency, efficiency, and impact verification compared to traditional instruments.

Sources

• Boston Consulting Group. "Relevance of On-chain Asset Tokenization in 'Crypto Winter.'" BCG Global, 2024.
• Monetary Authority of Singapore. "Project Guardian: Exploring Asset Tokenization and DeFi." MAS, 2024.
• World Economic Forum. "Blockchain and Asset Tokenization: Accelerating Financial Inclusion." WEF, 2024.
• International Organization of Securities Commissions (IOSCO). "Policy Recommendations for Crypto and Digital Asset Markets." IOSCO, 2023.
• European Securities and Markets Authority (ESMA). "MiCA Regulatory Technical Standards." ESMA, 2024.
• DefiLlama. "RWA Total Value Locked Analytics." DefiLlama, accessed January 2026.
• Chainlink Research. "The State of RWA Tokenization: Oracles and Verification." Chainlink Labs, 2025.