Myth-busting Tokenization & real-world assets (RWAs): separating hype from reality

Tokenized real-world assets on public blockchains grew 251% year-over-year in 2024-2025, with tokenized US Treasuries alone expanding from $2.48 billion to $8.7 billion. BlackRock's BUIDL fund—launched in March 2024 at $40 million—crossed $1.8 billion by late 2025, demonstrating that institutional capital is flowing into on-chain infrastructure at unprecedented scale. Yet for every legitimate RWA deployment, dozens of speculative projects make claims disconnected from regulatory reality, technical capability, or economic logic. Investors navigating this landscape need rigorous frameworks to distinguish transformative infrastructure from marketing theater.

Why It Matters

Tokenization promises to unlock $400+ trillion in global real estate, private equity, and alternative assets currently constrained by illiquidity, high minimums, and fragmented markets. Industry projections range wildly—from Ripple/BCG's $18.9 trillion by 2033 to Standard Chartered's $30 trillion by 2034—but even conservative estimates suggest multi-trillion-dollar transformation of capital markets infrastructure.

For investors, the implications are structural. Traditional private market investments require $250,000+ minimums, 10-year lockups, and accredited investor status. Tokenized equivalents can offer $1,000 minimums, 24/7 secondary liquidity, and programmable compliance. The efficiency gains are real: JPMorgan estimates 65% cost reduction in bond issuance, 30% in settlement time, and near-elimination of reconciliation errors.

The regulatory landscape has matured significantly. Singapore's MAS, the UAE's VARA, Switzerland's FINMA, and Hong Kong's SFC have established clear frameworks for tokenized securities. The EU's MiCA regulation provides harmonized crypto-asset rules across 27 member states. The SEC, while maintaining enforcement posture, has approved spot Bitcoin ETFs and engaged constructively on custody and broker-dealer registration for digital assets. Regulatory clarity enables institutional participation previously impossible.

Yet misconceptions persist. Many projects conflate tokens with actual legal claims, assume blockchain immutability solves asset verification, or ignore the oracle problem's fundamental constraints. Separating hype from reality requires understanding both technological capabilities and legal-economic frameworks.

Key Concepts

Asset Classes Being Tokenized

Asset Class	2025 On-Chain Value	YoY Growth	Key Platforms
Private Credit	$16.8-18.7B	37%	Centrifuge, Goldfinch, Maple
US Treasuries	$8.7B	251%	BlackRock BUIDL, Franklin Templeton, Ondo
Real Estate	$3.2B	85%	RealT, Lofty, Propy
Commodities (Gold)	$2.9B	164%	Paxos Gold, Tether Gold
Private Equity	$1.5B	120%	Securitize, Tokeny

Technical Architecture

Tokenization requires bridging on-chain and off-chain systems:

Token Standard: ERC-3643 (permissioned), ERC-1400 (security tokens), ERC-20 (basic)
Identity Layer: KYC/AML verification linked to wallet addresses
Oracle Infrastructure: Price feeds, NAV calculations, asset verification
Custody: Qualified custodians holding underlying assets
Smart Contracts: Programmable compliance, dividend distribution, corporate actions

Regulatory Frameworks

Jurisdiction	Framework	Status	Key Features
Singapore	MAS Digital Token Guidelines	Active	Securities licensing, sandbox
UAE	VARA Regulations	Active	Full regulatory framework, RAK DAO
Switzerland	DLT Act	Active	Uncertificated securities on blockchain
Hong Kong	SFC Guidelines	Active	Licensed exchange framework
EU	MiCA	Active (Dec 2024)	Harmonized crypto-asset rules
USA	SEC Enforcement	Case-by-case	No comprehensive framework

The Myths Debunked

Myth 1: Tokenization Creates Instant Liquidity

Reality: Tokens are liquid only when active secondary markets exist. Most tokenized real estate and private equity projects have minimal trading volume—often <$10,000 daily. True liquidity requires market makers, exchange listings, and sufficient investor base. The most liquid RWA tokens (BUIDL, USDC, tokenized Treasuries) succeed because they represent already-liquid underlying assets, not because tokenization magically creates liquidity.

Myth 2: Blockchain Solves the Trust Problem

Reality: Blockchain provides immutable record-keeping, not asset verification. A token representing fraudulent real estate remains fraudulent regardless of blockchain immutability. The oracle problem persists: connecting on-chain tokens to off-chain assets requires trusted intermediaries for verification, custody, and legal enforcement. Tokenization shifts but does not eliminate trust requirements.

Myth 3: Smart Contracts Eliminate Counterparty Risk

Reality: Smart contracts automate execution but cannot adjudicate disputes or compel real-world performance. If a property token issuer commits fraud, smart contracts cannot recover funds or deliver the underlying property. Legal enforcement, insurance, and traditional counterparty assessment remain essential. Smart contracts reduce operational risk; they don't eliminate credit or fraud risk.

Myth 4: Tokenization Is Regulatory Arbitrage

Reality: Securities laws follow economic substance, not technical form. A tokenized investment contract is still a security under Howey test analysis. The SEC has brought enforcement actions against numerous tokenized security offerings lacking proper registration. Compliant tokenization requires working within securities law, not around it. Jurisdictions with clear frameworks (Singapore, Switzerland) enable compliant issuance, not regulatory avoidance.

Myth 5: Fractional Ownership Is Tokenization's Primary Value

Reality: Fractional ownership existed long before blockchain—REITs, mutual funds, and syndications all fractionalize assets. Tokenization's differentiated value lies in programmability (automated compliance, dividend distribution, corporate actions), interoperability (cross-platform composability), and transparency (real-time on-chain verification). Projects emphasizing only fractionalization miss blockchain's actual advantages.

Myth 6: Decentralization Benefits All RWA Applications

Reality: Centralization is often appropriate for RWAs. Permissioned blockchains (Provenance, Canton) dominate institutional deployments because they offer regulatory clarity, efficient consensus, and known counterparties. Fully decentralized DeFi primitives struggle with AML/KYC requirements and regulatory enforcement. The winning architecture often combines permissioned rails with public chain settlement.

Myth 7: RWA Tokens Will Replace Traditional Finance

Reality: Integration, not replacement, is the realistic trajectory. BlackRock's BUIDL settles on Ethereum but operates within existing securities law, custody frameworks, and institutional processes. Tokenization digitizes rails rather than replacing the entire system. The interoperability opportunity—connecting on-chain and off-chain capital—is more valuable than isolated on-chain ecosystems.

Myth 8: All Tokenization Platforms Are Equivalent

Reality: Platform quality varies enormously. Key differentiators include:

Legal structuring (proper SPV/trust arrangements)
Custody arrangements (qualified custodian vs. self-custody)
Secondary market access (exchange listings, market maker agreements)
Oracle reliability (audited price feeds, collateralization verification)
Track record (actual distributions paid, defaults handled)

Due diligence must evaluate these factors, not just token mechanics.

Myth 9: High Yields Signal Legitimate Opportunities

Reality: RWA protocols offering 15-30% yields often obscure risk through complex tokenomics. Lending protocols like Goldfinch and Maple faced significant defaults in 2022-2023 when borrowers (often crypto companies) collapsed. Legitimate yields on tokenized Treasuries (4-5%) or investment-grade private credit (8-12%) reflect actual risk-adjusted returns. Outsized yields indicate either hidden risk or unsustainable token subsidies.

Myth 10: Tokenization Automatically Improves ESG Tracking

Reality: On-chain tracking is only as good as off-chain verification. Tokenized carbon credits faced scandals when underlying offsets were revealed as fraudulent. Tokenized green bonds require the same due diligence as traditional green bonds—blockchain doesn't verify environmental additionality. MRV (Monitoring, Reporting, Verification) systems must be robust before tokenization adds value.

What's Working

Tokenized Treasuries and Money Markets

The fastest-growing RWA segment offers genuine value: 24/7 settlement, blockchain-native collateral, and competitive yields. BlackRock's BUIDL crossed $1.8 billion because it solves a real problem—DeFi protocols needing stable, yield-bearing collateral without counterparty risk. Franklin Templeton's BENJI ($800 million on Stellar) and Hashnote's USYC ($572 million) demonstrate institutional demand.

Key success factors: Real underlying assets (T-bills), qualified custody (BNY Mellon for BUIDL), regulatory compliance, and deep liquidity. These projects succeed not because they're radical, but because they're conservative tokenization of already-proven assets.

Private Credit On-Chain

Centrifuge pioneered on-chain private credit, connecting DeFi capital to real-world lending. The model: originators (real-world lenders) create asset pools, tokenize loan portfolios, and access cheaper capital than traditional securitization. With $500+ million in lifetime originations, the platform has demonstrated sustainable unit economics.

The learning curve was painful. 2022-2023 saw defaults from crypto-exposed borrowers. The industry response: stricter underwriting, diversified borrower bases (trade finance, inventory financing, revenue-based financing), and improved disclosure. Current protocols show <5% default rates on diversified pools.

Institutional Blockchain Adoption

Provenance Blockchain has processed $12+ billion in RWA transactions, primarily for private credit and real estate. The platform's success stems from enterprise-grade infrastructure: permissioned validators, SEC-compliant security token framework, and integration with traditional custody. Figure Technologies (home equity loans) and Apollo (private credit) deploy on Provenance.

What's Not Working

Speculative Real Estate Tokenization

Many tokenized real estate platforms fragment trophy assets into $50 tokens with minimal secondary trading. Without market makers or exchange listings, investors face illiquidity worse than traditional real estate syndications—but with added smart contract and platform risk. The illiquidity discount offsets any fractionalization benefit.

Cross-Chain Fragmentation

RWAs exist across Ethereum, Polygon, Avalanche, Stellar, Provenance, and private chains—with limited interoperability. Transferring tokenized assets between ecosystems requires bridges, wrapped tokens, or centralized conversion. This fragmentation undermines the liquidity aggregation promise.

Oracle Manipulation Risk

Private credit and real estate tokens rely on oracle infrastructure for NAV calculations. Manipulation or failure of these oracles can misrepresent asset values, enable exploits, or trigger unwarranted liquidations. The 2023 Goldfinch default highlighted that on-chain systems are only as reliable as their off-chain inputs.

Key Players

Established Leaders

BlackRock (USA): BUIDL fund, $1.8B+ AUM, setting institutional standard for tokenized Treasuries
Franklin Templeton (USA): BENJI on Stellar, $800M+ AUM, early mover in regulated tokenization
Securitize (USA): SEC-registered transfer agent, tokenizing KKR, Hamilton Lane funds
Provenance Blockchain (USA): $12B+ processed, Figure Technologies parent, private credit focus
Centrifuge (Germany): DeFi-native private credit, MakerDAO integration, $500M+ originated

Emerging Startups

Ondo Finance (USA): Tokenized Treasuries and corporate bonds, $400M+ TVL
Backed Finance (Switzerland): bCSPX tokenized S&P 500 ETF, European regulatory framework
Maple Finance (Australia): Institutional private credit, rebuilt after 2022 defaults
Goldfinch (USA): Emerging markets lending, credit funds integration
RealT (USA): Tokenized US real estate, fractional rental properties

Key Investors & Funders

a16z Crypto: Backing Centrifuge, Goldfinch, and infrastructure plays
Coinbase Ventures: Strategic investments across RWA ecosystem
Circle Ventures: Stablecoin integration with RWA rails
Apollo Global: Direct participation via tokenized private credit
Hamilton Lane: Tokenized fund shares via Securitize, institutional validation

Real-World Examples

1. Siemens €300M Digital Bond

In February 2024, Siemens issued a €300 million digital bond on Polygon—the largest corporate bond issuance on public blockchain. The bond carries a 3.25% coupon and matures in 2026. Settlement occurs on-chain, with Deutsche Bank providing custody and BNP Paribas, DekaBank, and DZ Bank participating. The issuance demonstrates that blue-chip corporates view tokenization as operational improvement, not speculative experiment.

2. MakerDAO's RWA Portfolio

Decentralized stablecoin protocol MakerDAO (now Sky) allocated $2+ billion of its collateral to RWAs, including US Treasuries and private credit. The strategy provides yield to support DAI's stability, diversifying from volatile crypto collateral. Blocktower Credit and Centrifuge provide structured credit exposure; Coinbase and BlockTower custody tokenized T-bills. This represents DeFi's largest integration of traditional financial assets.

3. Figure Technologies Home Equity

Figure Technologies has originated $8+ billion in home equity loans tokenized on Provenance Blockchain. The platform leverages blockchain for title verification, lien recording, and secondary market trading. Average origination-to-funding time: 5 days versus 30-60 for traditional home equity. Secondary market liquidity enables investors to trade positions rather than holding to maturity. Figure's success demonstrates that tokenization can improve loan economics, not just trading mechanics.

Sector-Specific KPIs

Metric	2024	2025	Leading Projects
Total on-chain RWAs (excl. stablecoins)	$15B	$33B	BUIDL, Centrifuge, Provenance
Tokenized Treasury TVL	$2.5B	$8.7B	BlackRock, Franklin Templeton
Private credit on-chain	$13.7B	$18.7B	Centrifuge, Maple, Goldfinch
Average default rate (private credit)	8-12%	3-5%	Diversified pools
Institutional AUM committed	$100B+	$250B+	BlackRock, Apollo, Hamilton Lane
Secondary market daily volume	$5-10M	$25-50M	Ethereum, Provenance

Action Checklist

Evaluate RWA platform legal structure—confirm proper SPV/trust arrangements with qualified counsel
Verify custody arrangements with qualified custodian (not self-custody or DeFi protocols)
Assess oracle infrastructure—audited price feeds, multiple data sources, manipulation resistance
Analyze secondary market liquidity—actual trading volume, not theoretical token transferability
Review regulatory status—jurisdiction-specific compliance, not regulatory arbitrage claims
Stress-test yield sources—identify whether returns come from asset performance or token emissions
Conduct counterparty due diligence—track record, capitalization, insurance coverage

FAQ

Q: Are tokenized securities regulated like traditional securities? A: Yes, in most jurisdictions. A tokenized security is still a security under economic substance analysis. Issuers must comply with securities laws, which typically require registration or exemption, proper disclosure, and use of regulated intermediaries. Jurisdictions with clear frameworks (Singapore, Switzerland, UAE) enable compliant issuance.

Q: What's the difference between stablecoins and tokenized deposits? A: Stablecoins (USDC, USDT) are bearer instruments issued by private companies, representing claims on reserve assets. Tokenized deposits are bank-issued, representing actual deposits with FDIC insurance (where applicable) and Fed wire access. JPMorgan's JPM Coin and regulated alternatives provide institutional-grade settlement rails.

Q: How do investors recover assets if a tokenization platform fails? A: Recovery depends on legal structure. Properly structured SPVs with bankruptcy-remote treatment allow underlying asset recovery regardless of platform failure. Investors should verify legal documentation, not assume token ownership equals asset ownership. Platform risk is distinct from asset risk.

Q: What blockchain is best for RWA tokenization? A: Depends on use case. Ethereum dominates public market RWAs (BUIDL, Ondo) due to ecosystem maturity. Provenance leads private credit/real estate in North America. Stellar hosts Franklin Templeton's fund. Polygon offers low-cost execution for high-volume applications. Institutional deployments often use permissioned chains (Canton, R3 Corda) for regulatory clarity.

Q: Can retail investors access tokenized assets? A: Increasingly yes, but access varies by jurisdiction and product. Tokenized Treasuries from Ondo and Backed are available to global investors (with KYC). Tokenized private equity typically requires accredited investor status. Fractional real estate (RealT) accepts non-accredited investors in certain structures. Always verify offering terms and regulatory status.

Sources

CoinGecko. (2025). 2025 RWA Report. https://assets.coingecko.com/reports/2025/CoinGecko-2025-RWA-Report.pdf
Ripple & BCG. (2024). Tokenization: A Digital Asset Déjà Vu. https://www.bcg.com/publications/2024/tokenization-digital-asset-deja-vu
RWA.xyz. (2025). Real-Time Tokenized Asset Dashboard. https://www.rwa.xyz
BlackRock. (2025). BUIDL Fund Documentation. https://www.blackrock.com/corporate/literature/whitepaper/buidl-fund-overview.pdf
Investax. (2025). Q3 2025 Real World Asset Tokenization Market Report. https://investax.io/blog/q3-2025-real-world-asset-tokenization-market-report
Securitize. (2024). SEC-Registered Transfer Agent Services. https://www.securitize.io
S&P Global. (2024). Tokenization in Financial Markets: Progress and Challenges. https://www.spglobal.com/ratings
Provenance Blockchain Foundation. (2025). Ecosystem Overview. https://provenance.io