Despite the sudden surge of enterprise interest in stablecoins, it was the tokenization of real world assets (RWA) that represented the crypto sector’s first major play for the institutional financial space.
The pitch for tokenization is a conceptually linear one: put an asset on chain and trading becomes continuous, settlement instantaneous, ownership programmable, and intermediaries optional.
It’s the business model of blockchain-based lender Figure, which announced last week (Feb. 4) that it is expanding investor access to its On-Chain Public Equity Network (OPEN) and extending the distribution of blockchain-native public equities on regulated brokerage platforms and self-custody wallets.
Last month (Jan. 19), the New York Stock Exchange (NYSE), part of Intercontinental Exchange (ICE), even announced that it is developing a platform for the trading and on-chain settlement of tokenized securities, for which it will seek regulatory approvals.
But across the tokenization marketplace a more complicated reality may be emerging in parallel. The technology behind asset tokenization largely works as advertised. Public blockchains run 24/7 and settlement finality is measured in minutes, sometimes seconds. Custody tooling has matured, and institutional-grade infrastructure exists. Yet for most tokenized real-world assets, liquidity remains elusive. Volumes are thin, bid-ask spreads are wide, and exits often depend not on market depth but on issuer discretion and legal processes that sit firmly off-chain.
It’s still early days, but many of the top 10 tokenized RWAs by value are in fact commodity-backed stablecoin instruments and not the kind of financial derivatives tokenized markets rely upon to scale.
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For CFOs and treasury teams evaluating tokenized RWAs as part of their liquidity, yield, or balance-sheet strategy, the central lesson is that “on-chain” is not synonymous with “liquid,” and that many tokenized RWAs can behave far more like private instruments than tradable securities.
See also: NYSE Takes Stocks On-Chain and Tests Wall Street’s Old Rules
When Liquidity Becomes a Metaphor
Liquidity is a deceptively precise word in finance. It does not mean tradable in theory or transferable in code. It means the ability to exit a position at or near fair value, within a predictable time frame, without materially moving the market. In public equities and major fixed-income markets, liquidity is a function of participation, standardization, and trust in enforceable rights.
Tokenization, by contrast, solves a different class of problems. It improves recordkeeping, enables fractional ownership, reduces settlement risk, and allows assets to move across systems without manual reconciliation. These are meaningful gains. But none of them, on their own, create buyers.
Many tokenized RWAs today can exist in markets with a limited number of active participants. Trading venues, in many cases, are fragmented, incentives for market makers are limited, and price discovery is fragile. A token may be transferable at any time, but if there is no one on the other side of the trade, liquidity is theoretical.
For treasury teams accustomed to evaluating liquidity through cash conversion cycles, duration ladders, and stress scenarios, this distinction matters. A token that settles instantly but requires weeks of negotiation to redeem is not liquid in any useful sense. It is simply faster paperwork.
At current adoption levels, tokenized RWA markets are small. Even optimistic estimates place total outstanding value well below what would be required to support robust secondary trading across asset classes. Without scale, market makers can struggle to justify balance-sheet allocation. Without market makers, spreads can widen. Without tight spreads, institutional participation may remain cautious.
See also: Bitcoin to Zero? ‘Big Short’ Investor Flags Crypto’s Death Spiral Risk
Technology Is Not the Constraint
The scalability of tokenized RWAs is not being limited by technology. Blockchains have objectively solved settlement and transparency problems, but these issues exist downstream of liquidity, not upstream of it. Liquidity emerges from legal certainty, standardized rights, and a large, diverse base of participants with aligned incentives.
And a deeper issue exists that goes beyond market depth. Many tokenized RWAs do not grant holders direct, enforceable claims on underlying assets. Instead, they represent contractual promises issued by an entity that controls the asset, the redemption process, or both. The result is that RWA tokens can resemble private placements more than public instruments.
For CFOs and treasury teams, the practical question is not whether to engage with tokenized RWAs, but how to do so without importing unpriced risks.
PYMNTS explored the tokenization topic over this past summer in an interview with Brett McLain, head of payments and blockchain at cryptocurrency exchange Kraken.
“The tokenization of real-world assets [has] long been a holy grail for crypto … making those real-world assets more accessible globally to consumers,” McLain said. “We want to see that grow into other things like real estate and other tangible assets.”
The PYMNTS Intelligence and Citi report “Chain Reaction: Regulatory Clarity as the Catalyst for Blockchain Adoption” found that blockchain’s next leap will be shaped by regulation; that evolving guidance is beginning to create the foundations for safe, scalable blockchain adoption; and that implementation challenges continue to complicate progress.