What Is Tokenization?

Tokenization is the process of creating a digital representation of an asset on a blockchain. A token representing a real-world asset is essentially a smart contract that says: "This blockchain token corresponds to ownership of [specific asset], and whoever holds this token has a legal claim to [specific rights] in that asset."

The underlying asset might be a US Treasury bond, a share of commercial real estate, a private credit loan, a gold bar, a piece of infrastructure, or a work of art. The token lives on a blockchain like Ethereum, making it programmable, transferable, and composable with other blockchain-based financial instruments.

Tokenization is not new — the concept has been discussed since the early days of blockchain. What has changed in 2025–2026 is that the institutional infrastructure to do it at scale has finally arrived, and the products being tokenized are now mainstream financial assets, not obscure crypto-native tokens.

Why Tokenize Assets?

Traditional financial assets are difficult to move. A US Treasury bond held in a brokerage account takes two days to settle after a trade. Real estate transactions involve lawyers, title companies, escrow accounts, and recording fees — and still take 30–60 days to close. Private credit funds have minimum investment sizes of $1 million or more and lock-up periods of 3–7 years, excluding individual investors entirely.

Tokenized assets address these frictions:

Instant settlement — Blockchain transactions settle in seconds or minutes, compared to T+2 for most securities. This reduces counterparty risk and frees up capital that would otherwise be parked waiting for settlement.

Fractional ownership — A $10 million commercial building can be tokenized into 10 million tokens worth $1 each, allowing investors with limited capital to own a fraction of an asset that was previously inaccessible.

24/7 trading — Blockchain markets don't close. Tokenized assets can trade continuously, unlike stock exchanges that operate for limited hours in specific time zones.

Programmability — Smart contracts can automatically distribute yield (interest, dividends, rental income) to token holders, enforce transfer restrictions (such as KYC/AML requirements), and integrate with DeFi protocols.

What Is Actually Being Tokenized

US Treasury bills — The fastest-growing segment. BlackRock's BUIDL fund (launched March 2024) tokenizes short-term US government debt on Ethereum and distributes daily yield to token holders. As of mid-2026, BUIDL has over $2 billion in assets under management. Franklin Templeton's BENJI fund and Ondo Finance's USDY/OUSG products are other major examples. Total tokenized Treasury market: approximately $8 billion as of June 2026, growing rapidly.

Private credit — Centrifuge, Maple Finance, and Goldfinch tokenize real-world loans — everything from trade finance receivables to small business loans — allowing DeFi capital to fund real-world borrowers. This market has over $3 billion in active loans.

Real estate — Platforms like RealT (individual properties in the US) and Lofty (rental properties) tokenize residential real estate and distribute rental yield to token holders. Commercial real estate tokenization at institutional scale is less developed but actively being piloted.

Commodities — Paxos Gold (PAXG) represents a tokenized ounce of LBMA gold stored in Brinks vaults. Tether Gold (XAUt) is a competing product. Together they represent several hundred million dollars in tokenized gold.

Private equity and funds — Hamilton Lane and KKR have experimented with tokenized feeder funds that allow smaller minimum investments into otherwise institutional-only private equity products.

The Institutional Push

The most significant development in RWA tokenization in 2025–2026 has been serious institutional commitment:

BlackRock — The world's largest asset manager (over $10 trillion AUM) launched BUIDL on Ethereum and has publicly stated that tokenization is "the next generation for markets." CEO Larry Fink called it transformative in his 2024 shareholder letter.

JPMorgan — JPMorgan's Onyx platform handles tokenized repo transactions — using tokenized US Treasuries as collateral in overnight lending markets. The bank has processed over $700 billion in tokenized repo since launching in 2020.

Citi, Goldman Sachs, Deutsche Bank — All running tokenization pilots with varying asset classes. Goldman's GS DAP (Digital Asset Platform) has facilitated tokenized bond issuances for institutional clients.

When major financial institutions are not just experimenting but running live products at scale, it is a reasonable signal that tokenization is becoming a legitimate infrastructure layer in finance rather than a blockchain experiment.

The Regulatory Picture

Regulation is the most significant uncertainty in RWA tokenization. The fundamental question is: what legal rights does a token actually confer? The answer depends heavily on how each token is structured and which jurisdiction's laws apply.

In the US, most tokenized real-world assets are structured as securities and sold only to accredited investors (those with $1 million in net assets or $200,000 in annual income) to avoid SEC registration requirements. This limits retail access — the promised democratisation of asset ownership has not yet materialised for ordinary investors.

The EU's Markets in Crypto-Assets (MiCA) regulation, which fully came into force in 2024, creates a clearer framework for some categories of crypto assets but was primarily designed for crypto-native tokens, not tokenized traditional securities. The EU's separate DLT Pilot Regime allows certain trading and settlement of tokenized securities under a sandbox framework.

In Asia, Singapore (via MAS) and Hong Kong (via the HKMA and SFC) have been proactive in creating regulatory frameworks for tokenized securities, making them the most developed jurisdictions for institutional tokenization pilots.

What the Risks Are

Legal enforceability — A token is only as good as its legal structure. If the company holding the underlying asset goes bankrupt, do token holders actually have a claim? This depends on the specific legal structure and jurisdiction, and it has not been comprehensively tested in court.

Smart contract risk — The smart contracts that manage token distribution, transfer restrictions, and yield payments can have bugs. A vulnerability in a major tokenization platform's smart contracts could result in loss of funds.

Liquidity — Despite the promise of 24/7 trading, most tokenized asset markets have limited liquidity compared to traditional financial markets. Selling a large position in a tokenized real estate product may still be difficult.

Custody and oracle risk — For tokens representing physical assets (gold, real estate), there must be a trusted mechanism connecting the on-chain token to the off-chain asset. Custodians can fail; oracles (services that feed real-world data to blockchains) can be manipulated.

The Bottom Line

Real-world asset tokenization is not hype — it is a genuine structural change in how traditional financial assets are represented, transferred, and composed with digital finance infrastructure. The tokenized Treasury market alone has grown from essentially zero in 2023 to $8 billion in 2026, and BlackRock's participation is a clear signal that this is moving from experiment to infrastructure. The open questions are about legal enforceability, regulatory access, and whether retail investors will eventually be able to participate in products currently limited to accredited investors. For institutional investors and developers building financial applications, RWA is already a working market. For retail investors, it remains mostly theoretical — for now.