Tokenization is Full Steam Ahead… with Tracks Still Needing to be Built
Real-world asset (RWA) tokenization is rapidly gaining traction, exceeding $65 billion in market cap (excluding stablecoins) by May 2025, up from $50 billion at the end of 2024. This growth reflects institutional interest in collateral mobility, issuers seeking broader retail access to private assets, and a shift in crypto engagement towards more practical applications. The TokenizeThis 2025 conference highlighted key themes driving this evolution.
One major theme is enhancing RWA utility and collateral mobility. Blockchain technology allows for more flexible asset usage across various investor types, provided appropriate risk frameworks are in place. Examples include tokenized treasury products usable in both retail and institutional settings. A money market fund, for instance, can serve as collateral on a prime brokerage without requiring liquidation, maintaining yield for the investor. Retail applications allow for fund unit payments via linked debit cards. This improved liquidity extends to higher-risk investments, offering diverse applications based on blockchain’s inherent flexibility.
Tokenization is also disrupting lending and borrowing. Traditional lending processes are often cumbersome, while decentralized finance (DeFi) offers a streamlined alternative. Tokenized loans can facilitate faster transactions and broader access to capital, as exemplified by Figure’s blockchain-based HELOC solution, which achieved 150 basis points in operational savings. For investors, DeFi vaults offer similar streamlining, as demonstrated by Apollo’s tokenized private credit fund utilizing leverage loops to enhance yield within a programmatic risk framework. However, challenges remain, including high custody and liquidity costs, limited RWA composability in DeFi, and limited appeal to crypto-native users seeking higher returns.
Another key theme is the impact of RWAs on traditional investment strategies and workflows. Blockchain’s ability to automate processes and provide on-chain transparency is revolutionizing how illiquid, high-yield assets are integrated into portfolios. This facilitates easier asset allocation, introducing new investment opportunities. The integration of blockchain will unlock new portfolio construction tools, enabling blockchain-native strategies combining crypto and private asset allocations for improved diversification and yield generation. However, achieving this requires interoperability between legacy and blockchain infrastructures, addressing issues like workflow alignment, price transparency, and risk management. The shift is from theoretical applications to practical implementations across traditional and decentralized finance, focusing on increased utility, improved collateral mobility, new financial products, and efficient workflows. The ultimate goal is to democratize illiquid assets and enhance overall financial efficiency.
