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Ever wondered how physical assets like real estate or gold could exist on a blockchain? That’s exactly what RWA tokenization does, and it’s transforming how we invest in 2025.
What Is RWA Tokenization?
RWA tokenization is the process of converting real-world assets into digital tokens on a blockchain. Think of it like turning a property deed or a bar of gold into a digital certificate that you can buy, sell, or trade online.
These tokens represent ownership rights to physical assets—whether that’s buildings, bonds, art, or even diamonds. By mid-2025, the tokenized RWA market hit over $25 billion, growing 245 times since 2020.
How Does RWA Tokenization Work? Two Main Types
Understanding how RWA tokenization works starts with knowing there are two different approaches:
1. Off-Chain Tokenization (Digital Twins)
The actual asset stays in the real world, but you create a digital token that represents it on the blockchain. For example, a tokenized bond is still a traditional bond, just represented digitally.
2. On-Chain Tokenization (Native Tokens)
The entire asset exists only on the blockchain from start to finish. A bond token, for instance, is created, managed, and settled entirely through smart contracts without a physical counterpart.
What Assets Can Be Tokenized?
Almost anything valuable can be tokenized. Here’s what’s popular in 2025:
Financial Assets
- U.S. Treasury bonds (currently $7.5 billion tokenized)
- Corporate bonds
- Money market funds
Private Credit
- Small business loans
- Invoice financing
- Currently the biggest category at $14.7 billion
Real Estate
- Houses and apartments
- Office buildings
- Property titles
- Projected to reach $4 trillion by 2035
Physical Goods
- Gold and precious metals
- Diamonds
- Luxury items
Alternative Assets
- Artwork
- Carbon credits
- Intellectual property
Why Tokenize Real-World Assets? The Big Benefits
You Can Own a Fraction
Instead of needing millions to buy an entire building, tokenization lets you buy a small piece. It’s like buying a slice of pizza instead of the whole pie. This opens investing to regular people, not just the wealthy.
Better Liquidity
Assets that normally take months to sell—like real estate or fine art—become easier to trade when tokenized. You’re not stuck waiting for one buyer; you can sell tokens to multiple people.
Everything Is Transparent
Blockchain creates a permanent record that everyone can see. You know exactly who owns what and can track every transaction. No hidden surprises.
Lower Costs
Smart contracts handle paperwork and processes automatically, cutting out middlemen. This means lower fees for everyone involved.
Programmable Rules
Want dividends paid automatically every month? Or restrict who can buy tokens? Smart contracts make this possible without manual work.
The Step-by-Step Tokenization Process
Here’s how RWA tokenization works in practice:
Step 1: Pick and Value the Asset Choose an asset worth tokenizing and get it professionally valued. Could be a building, artwork, or loan portfolio.
Step 2: Set Up Legal Structure Create a legal entity (like a special purpose vehicle) to hold the asset. This protects investors and ensures the tokens represent real ownership.
Step 3: Secure the Asset Physical assets go into professional custody—think bank vaults or secure facilities. Licensed custodians keep everything safe.
Step 4: Create the Tokens Build smart contracts on a blockchain (Ethereum, Polygon, or Solana are popular choices) that represent ownership shares.
Step 5: Sell to Investors Launch the primary offering where verified investors can buy tokens. Everyone goes through identity checks (KYC/AML).
Step 6: Enable Trading After the initial sale, tokens can trade on secondary markets—either through licensed exchanges or decentralized platforms.
Step 7: Ongoing Management Handle regular tasks like paying dividends, updating valuations, and staying compliant with regulations.
Who’s Actually Using This in 2025?
RWA tokenization has moved beyond theory. Major institutions are diving in:
BlackRock launched the BUIDL fund with $2.88 billion in tokenized money market assets.
Goldman Sachs and BNY Mellon tested tokenized money market funds using blockchain technology.
Franklin Templeton launched a tokenized money market fund in Singapore, one of Asia’s first.
DAMAC Properties announced a $1 billion deal with MANTRA to tokenize real estate in the UAE.
Even governments are interested. Bergen County, New Jersey plans to tokenize $240 billion in real estate deeds to modernize property records.
The Rules: What You Need to Know About Regulation
Regulations vary by location, but they’re critical for making tokenization work legally.
Bermuda’s Smart Approach
Bermuda created a balanced system that’s flexible but secure:
- Assets must be held in bankruptcy-protected structures
- Clear disclosure about what token holders actually own
- Strong cybersecurity requirements
- Anti-money laundering checks built in
Europe’s MiCA Framework
The EU created comprehensive rules categorizing tokens by type:
Asset Referenced Tokens link to commodities or currencies and need detailed whitepapers and approvals.
Electronic Money Tokens represent fiat currency and require full cash reserves backing every token.
Other Tokens like utility tokens have lighter requirements.
Where to Launch in 2025
Singapore offers clear rules and strong institutional support.
UAE (Dubai/Abu Dhabi) is moving fast with specific regulations attracting big deals.
USA treats most tokens as securities, creating opportunities but limiting retail access.
Switzerland and Japan provide legal certainty for tokenized securities.
The Biggest Challenge: Liquidity
Despite massive growth, there’s a catch—many tokenized assets are hard to actually trade.
The Problem
- Real estate tokens change hands maybe once a year
- Private credit tokens are mostly held long-term, not traded
- Regulatory restrictions limit who can buy and sell
- Fragmented markets spread trading across too many platforms
The Exception
Gold-backed tokens like PAXG trade actively on major exchanges, showing what’s possible when infrastructure exists.
Solutions Being Built
Hybrid platforms combining regulated and decentralized trading.
Collateral systems letting you borrow against tokens without selling them. MakerDAO already accepts tokenized Treasuries as collateral.
Better pricing through standardized valuations and transparent reporting.
Cross-chain bridges making tokens tradable across multiple blockchains.
What’s Next for RWA Tokenization?
The tokenization market is projected to grow from $25 billion today to $4-10 trillion by 2030. That’s massive.
The technology works. Major institutions are committed. Regulations are forming. The missing piece is making these tokens easy to trade—shifting from an issuance focus to a trading focus.
As markets mature and rules harmonize globally, tokenization will deliver on its promise: making investing more accessible, transparent, and efficient for everyone.
The future of finance is being built right now, one tokenized asset at a time.