Cryptocurrency And while blockchain has long been committed to reforming finance, digital assets have been characterized by extreme volatility.
To mitigate this risk, developers are turning to the physical world. It uses assets such as gold, oil, and real estate to provide realistic support and lasting value to digital currencies.
In this article, we explore tokenizing real-world assets and what it means for the blockchain industry.
What is tokenization?
Before you can use real-world assets to back up your digital assets, you must tokenize them.
Tokenization is the process of creating a digital representation or token of an asset above Blockchainallowing you to manage ownership and transactions electronically and transparently.
How do you tokenize RWA?
The actual process of tokenizing real-world assets depends on the protocol used, but in general, the process follows a similar pattern. Explore how to proceed with painting tokens:
- Legal Structure: To enable compliant digital representation, ownership of the painting is transferred to a corporation or trust.
- Asset Digitalization: Smart contracts are deployed on blockchains like Ethereum or Solana To mint the tokens, each represents a partial interest in painting.
- Token Asset Link: tHis token is legally bound by the entity holding the painting, giving the owner an enforceable right to ownership or value.
- On-Chain Transactions: Tokens can be traded in the secondary blockchain market, which supports asset-backed tokens and offers liquidity and global accessibility.
- Governance and payment: If paint is on sale, revenue will be automatically distributed to token holders based on smart contract logic.
Use cases for real world assets (RWAS) on the blockchain
For Morgan Krupetsky, head of AVA Labs’ institutions and capital markets, tokenization is important for releasing global access to traditional, restricted financial products, and works by placing previously illiquid assets to allow them to be used as collateral. defi.
“Tokenization has allowed almost anyone with an internet connection to access USDS, USD-based savings accounts, US stocks and alternative assets,” Krupetsky said. Decryption. “This allows for the ability to pledge assets more easily, as a collateral primitive, and to function historically locked capital or illiquid positions.”
Some use cases for real-world asset tokenization include:
- 🏠Tokenized Real Estate: Real estate properties are converted into blockchain tokens, and platforms like Propy and Realt allow users to purchase fractional ownership of a home or building.
- token-Tokenized products: Products such as gold and oil are represented as blockchain collateral tokens, as seen in Paxos Gold (PAXG).
- Chain-on-chain loans secured by RWA: Assets such as real estate and invoices are used as collateral for blockchain-based loans offering Makerdao, Centrifuge, and Goldfinch.
- 🖼️Tokenization of art and collectiblesPhysical assets such as Fine Art, Rare Collectibles and even Fine wine are tokenized for digital ownership of fractions, led by companies such as Savea, Masterworks and Mattereum.
For Sam Mudie, CEO and co-founder of UK-based tokenization company Savea, RWAS also offers a bridge between the traditional world and the traditional world. Decentralized finance.
“RWA tokenization is innovative because of its ability to improve accessibility and scalability, operational efficiency, security and transparency, and liquidity,” Mudie said. Decryption. “So, if the current inefficiency is at its maximum, the opportunity is at its maximum.”
According to Mudie, tokenization could stimulate centuries-old industries, including wine, whiskey, watches, and art. These industries operate on very outdated infrastructures in a very limited market that still relies on face-to-face relationships.
“Tokenization of these asset classes is a multiplier of important forces,” he said.
Who is tokenizing RWA?
Many projects are already involved in real-world assets tokens, with over $10 billion of RWAs locked to decentralized platforms in March 2025.
Cryptocurrencies that claim to be backed by real-world assets include Pax Gold, tied to an ounce of gold stored in a London vault. Tether gold linked to troy ounce gold in a Swiss safe. And real estate offers iconic stocks in US real estate.
Companies that focus on real-world assets tokenization include avalanches, centrifugals, realtens and securitization.
According to Coingecko, the total real-world asset markets was approximately $37 billion in capital as of April 2025. In March 2025, real-world assets totaled $10.2 billion, locked at 79. defi Platform.
Issues and regulatory hurdles
Before tokenization became mainstream, Krupetsky said clear regulatory guidance should be needed around it stablecoinsespecially in the US, we make it clear that blockchain will act as a legal record of tokenized assets.
“Until then, many securities remained dual controls off-chain, as well as those measured in chains, increasing costs and complexity,” she said. “We also need to look at tokenized assets integrated into traditional distribution channels.
- ⚖️Legal ownership: Holding a token does not necessarily mean retaining a legal title. Real estate and other physical assets require traditional processes, such as notarized conduct and court filing.
- Censible License Requirements: Depending on how the token is issued, platforms that provide tokenized assets may require a broker-dealer or financial services license.
- AML and KYC Compliance: Token platforms must comply with the laws of Money Laundering Anti-Money Laundering and Customer (KYC).
- 🌎 Jurisdiction conflict: Physical assets are associated with local law, but tokens can trade globally and create complex legal mismatches that are difficult to navigate.
According to Centrifuge CEO Bhaji Illuminati, tokenization tends to fall into two categories: high liquid and stable assets such as bonds and more challenging assets with niche appeal, such as airspace rights and sports collectibles, are valuable primarily for passionate fans who have no way of sharing ownership.
“We know that we don’t have all the buyers and tokenizing assets that are not in demand makes no sense,” she said. “But there are pockets in different demand for a variety of reasons.”
Challenge, the Illuminati said Decryptionrethinking how financial infrastructure is designed and operated, while being “tokenizing products that people actually care about, matching supply and demand.”
“This is not tokenizing TradFi structures for distribution, but to rebuild the operational model from scratch,” the Illuminati said. “This represents the greatest opportunity for crypto infrastructure to fundamentally improve the way financial markets operate.”
The future of tokenized RWA
As technology continues to bridge the gap between the physical and digital worlds, tokenized RWA is poised to redefine the investment and dialogue in real-world assets tomorrow by predicting that space could reach $50 billion by the end of 2025.
“Tokenization of RWAS was one of the first major use cases for blockchain technology,” says Savea’s Mudie. “Instead of submission to this idea that the traditional financial ecosystem (many consumption dreams) enhance it. Real-world assets have been invested for decades or millennia.
