In today’s newsletter, Marcin Kazmierczak of Redstone takes 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.
-Sarah Morton
Where tokenized assets are today
Tokenization is moving from concept to allocation. What matters now is how these assets fit into portfolios and what they actually enable.
Your customers are already hearing and asking about tokenized assets, and that trend will only accelerate.
In the past 18 months, companies such as BlackRock, Franklin Templeton and Fidelity Investments have launched real products on the blockchain, including treasury funds and private credit strategies. Investors are taking notice. The numbers are increasing, the news is easy to track, and the basic idea is simple: Bonds, private credits and money market funds are now available on the chain without traditional intermediaries, and settlement is orders of magnitude faster.
That summary is mostly accurate, but it doesn’t tell the whole story.
The technology to create tokens has never been the biggest challenge. The real test comes later with decisions about compliance, identity, transfer rules, sanctions and lifecycle management. These are the areas where most projects slow down and where the market is developing now.
Last month, RedStone’s research team released the Tokenization & RWA Standards Report 2026, which examines how these systems are actually being built.
The compliance issue is an architecture issue
For issuers, the most important choice is not which blockchain to use, but where to place the compliance rules.
Compliance can be built directly into the token and enforced by smart contracts on every transfer. It can also be managed outside the token using tools like whitelisting. 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 Structures for Tokenized Assets, Source: Tokenization Standards Report
Putting compliance rules inside the token gives you precise control, but it makes the system less flexible. For example, updating a sanctions list or rule may require an upgrade to the contract, making a simple policy change a technical task. Handling compliance outside of the token makes things more flexible, but it means relying on intermediaries and potentially exposing assets if they leave their native environment. Enforcing rules at the network level makes token design easier, but it limits how easily the asset can be moved to other chains and systems.
For advisors, this is not an abstract design choice. It directly affects how an asset behaves. It determines whether it can move across chains, integrate with blue-chip 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 in 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 exceeded $840 million. Much of this activity follows a familiar structure: an investor pledges 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 done without a prime broker – faster, cheaper and with less friction.
How investors allocate these assets increasingly reflects broader market trends.
On a larger protocol, tokenized Treasury exposure fell sharply, while tokenized gold allocations expanded multiple times over the same period, tracking changes in interest 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 recasts the role of tokenized assets. They are not just wrappers around existing products. In the right structure, they become productive securities capable of generating additional dividends and participating in broader strategies while remaining in the portfolio.
The credit risk is becoming explicit
As these assets move into lending and structured strategies, credit risk evolves alongside specific DeFi strategies such as looping. New DeFi risk assessment frameworks like Credora introduce continuous, on-chain risk assessment, bringing a level of transparency that traditional markets rarely offer.
For advisers, it shifts the question from what the asset represents to how it behaves under stress and what risks it entails. Simple-to-understand ratings on a familiar A+ to D scale facilitate the creation of a risk-adjusted portfolio that attracts more and more interested parties.
What remains unresolved
There are still some structural gaps. Business actions are still heavily dependent on off-chain processes, and illiquid assets such as private credit and real estate are not yet fully compliant with DeFi standards.
Until these pieces are resolved, tokenization will continue to scale unevenly, with the most complex assets lagging behind the simplest. The bright side? Creators of tokenization frameworks are well aware of that limitation, and soon enough we should see solutions that address this gap.
Sanctions Screening Approaches in Tokenized Assets, Source: Tokenization Standards Report
– Marcin Kazmierczak, Co-Founder, Redstone
Ask an expert
Question: As tokenization moves from pilot programs to live financial infrastructure, what needs to happen for it to become a standard layer in global capital markets?
Tokenization becomes standard when it integrates with 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 across platforms.
Regular clarity is equally critical. Institutions need confidence in ownership rights, final settlement 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 supports 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 doesn’t. It simply makes assets easier to access. Take real estate 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 still is. Different platforms build their own ecosystems, which can lead to fragmented liquidity rather than one unified market.
Technology is moving fast, but infrastructure, regulation and investor participation are still coming in. 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 investment and could it be a catalyst to bring younger generations into 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 themselves, this group naturally expects financial systems to evolve in the same way as everything else in their lives.
This mindset is driving a greater willingness to explore asset classes beyond traditional stocks and bonds. Tokenization can open 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 adaptation. As the financial industry modernizes, it begins to reflect the speed, transparency and accessibility younger investors are used to. That shift is likely to play a meaningful role in attracting a new generation to invest.
– Kieran Mitha, Marketing Coordinator
