In today’s newsletter, Redstone’s Marcin Kazmierczak walks us through the evolution of tokenization as it moves from “concept to allocation.”
Then, in “Ask an Expert,” Kieran Mitha answers investor questions about tokenized investments.
– Sara Morton
Where are tokenized assets today?
Tokenization is moving from concept to assignment. What matters now is how these assets fit into portfolios and what they actually enable.
Their customers are already hearing and asking about tokenized assets, and that trend will only accelerate.
In the last 18 months, companies like BlackRock, Franklin Templeton, and Fidelity Investments have launched real products on blockchain, including Treasury funds and private credit strategies. Investors are taking notice. The numbers are rising, the news is easy to follow, and the basic idea is simple: bonds, private credit, and money market funds are now available on-chain, without traditional intermediaries, and settlement becomes much faster.
That summary is mostly accurate, but it doesn’t tell the whole story.
The technology to create tokens has never been the main challenge. The real test comes later, with decisions about compliance, identity, transfer rules, sanctions and lifecycle management. These are the areas where most projects are slowing down and where the market is evolving now.
Last month, RedStone’s research team published the RWA Standards and Tokenization Report 2026, which examines how these systems are actually being built.
The compliance issue is an architectural issue.
For issuers, the most important choice is not which blockchain to use, but where to place compliance rules.
Compliance can be built directly into the token and enforced by smart contracts with each transfer. It can also be managed outside of the token using tools such as whitelists. Another option is to enforce compliance at the network level, where the blockchain itself decides which transactions are allowed.
Each method solves one problem but creates another.
Identity verification frameworks for tokenized assets, source: Tokenization Standards Report
Putting compliance rules inside the token gives you exact control, but makes the system less flexible. For example, updating a sanctions list or rule might require updating the contract, turning a simple policy change into a technical task. Managing compliance outside of the token makes things more flexible, but means relying on intermediaries and can expose assets if they leave their original environment. Enforcing rules at the network level makes token design easier, but limits the ease with which the asset can move to other chains and systems.
For advisors, this is not an abstract design choice. It directly affects the behavior of an asset. Determine if it can move across chains, integrate with leading decentralized finance (DeFi) protocols such as Morpho or Aave, and serve as collateral in a lending strategy. Two tokenized funds with identical underlying assets can behave very differently depending on this single architectural decision.
Institutional capital is already moving up the chain.
The transition from theory to practice is most evident in how tokenized assets are used in lending markets.
Deposits of real-world tokenized assets into DeFi lending protocols have surpassed $840 million. Much of this activity follows a familiar structure: an investor puts up a tokenized asset as collateral, borrows against it, and redeploys the borrowed capital, often back into the same asset. The mechanics are new, but the logic is not. It’s a programmatic version of the same capital efficiency strategies long used in traditional finance, now executed without a primary intermediary: faster, cheaper and with less friction.
How investors allocate these assets increasingly reflects broader market trends.
In one major protocol, exposure to tokenized Treasuries decreased sharply, while tokenized gold allocations increased several-fold over the same period, tracking changes in rate expectations with remarkable precision. It is the best showcase of how professional capital responds to macro signals through on-chain infrastructure.
For advisors, this reframes the role of tokenized assets. They are not simply wrappers for existing products. In the right structure, they become productive collateral, capable of generating additional returns and participating in broader strategies while still remaining in the portfolio.
Credit risk is becoming explicit
As these assets move into structured and lending strategies, credit risk evolves alongside specific DeFi strategies such as looping. Emerging DeFi risk rating frameworks, such as Credora, introduce continuous on-chain risk assessment, providing a level of transparency that traditional markets rarely offer.
For advisors, that shifts the question from what the asset represents to how it behaves under stress and what risks it entails. Easy-to-understand grades on a familiar scale from A+ to D make it easy to build a risk-adjusted portfolio, attracting more and more stakeholders.
What remains unresolved
Some structural gaps still persist. Corporate actions still rely heavily on off-chain processes, and illiquid assets like private credit and real estate are not yet fully compatible with DeFi standards.
Until those pieces are resolved, tokenization will continue to scale unevenly, with more complex assets falling behind simpler ones. The positive side? The creators of tokenization frameworks are well aware of that limitation and, very soon, we should see solutions that address that gap.
Sanctions detection approaches on tokenized assets, source: Tokenization Standards Report
– Marcin Kazmierczak, co-founder of Redstone
ask an expert
Q: As tokenization moves from pilot programs to actual financial infrastructure, what needs to happen for it to become a standard layer in global capital markets?
Tokenization becomes standard when it is integrated into existing financial systems rather than competing with them. The priority is interoperability between blockchains, custodians and traditional market infrastructure so that assets can move seamlessly between platforms.
Regulatory clarity is equally critical. Institutions need confidence in property rights, firmness of agreements, and compliance frameworks before allocating significant capital. We are already seeing early traction, but scale will come when tokenized assets match or exceed the efficiency, liquidity, and reliability of traditional securities. At that point, tokenization will not be considered innovation. It will simply be the infrastructure that will support modern markets.
Q: What are the most overlooked risks or misconceptions surrounding tokenized assets today?
One of the biggest misconceptions is that tokenization automatically creates liquidity. It’s not like that. It simply makes it easier to access assets. Take the real estate sector as an example. You can tokenize a property and split it into thousands of shares, but if there are no active buyers and sellers, those shares will still be difficult to trade.
Another challenge is how early the market is still. Different platforms are building their own ecosystems, which can lead to fragmented liquidity instead of a unified market.
Technology is advancing rapidly, but infrastructure, regulation and investor engagement are still catching up. That gap between what is possible and what is practical is where most of the risk exists today.
Q: For retail investors, does tokenization open the door to new types of investments? Could it be a catalyst to attract younger generations to the market?
Tokenization is emerging as younger generations move into higher-earning careers and take a more active role in managing their wealth. Having grown up through rapid technological change, this group naturally expects financial systems to evolve in the same way as everything else in their lives.
That mindset is driving a greater willingness to explore asset classes beyond traditional stocks and bonds. Tokenization can open up access to areas such as private markets and real estate, while offering a more digital and flexible investment experience.
It’s not just about new opportunities, it’s about alignment. As the financial industry modernizes, it begins to reflect the speed, transparency and accessibility that younger investors are accustomed to. That change is likely to play a significant role in attracting a new generation to investment.
– Kieran Mitha, Marketing Coordinator
