Ever wondered what it would be like to possess something outlandishly expensive and one-of-a kind? Maybe a Picasso, a 10-carat diamond, a limited edition Ferrari? By changing how we understand ownership, real world asset (RWA) tokenization could make the unattainable attainable.
More mundane assets like bonds and real estate are already moving into the DeFi ecosystem at speed. Figures from RWA.xyz show the market cap for tokenized RWAs hit a new all-time high of $20 billion this month – with BlackRock’s recently-launched tokenized U.S. Treasury fund (BUIDL) accounting for more than $2.5 billion.
Greater TradFi adoption seems almost certain. Is there a place for tokenized RWAs in your portfolio?
In RWA tokenization, physical assets like art, cash, real estate, or precious metals are used to create virtual investment vehicles on the blockchain.
Rather than use paper for the deed to a house or a certificate of authenticity, proofs of ownership and validity live in the decentralized finance (DeFi) ecosystem. There they can be traded between counterparties or fractionalized and put up for sale, giving many people partial ownership.
Real-world utility and ease of use are key attractions.
RWA tokenizing specialist Ondo Finance claims its onboarding process for retail traders can take less than five minutes — almost unheard of in technically complex DeFi. Last year its ONDO governance token grew by over 550%.
Mantra Chain aims to do the same for institutions, making the process of launching, listing, and trading RWAs compliant and similar to investing in real estate and corporate bonds. In 2024 its native OM token grew 2,100%. Both companies achieved a market cap of $1 billion or more.
Though it only captured mainstream media attention last year, tokenization has always been synonymous with blockchain.
Pritam Dutta, founder and chief executive of RWA tokenization company Zoth, told Bloomberg that “improved regulatory clarity and the approval of spot Bitcoin ETFs have boosted institutional confidence among traditional finance players.”
Oh Thongsrinoon, chief marketing officer of fashion metaverse company ALTAVA, told an industry gathering in August 2024 that DeFi innovations have made tokenized assets more trustworthy and reliable.
In a posting on X last year, Tom Wan, a digital asset strategy associate at crypto asset manager 21.co, said decentralized autonomous organizations (DAOs) were tapping into this newfound sense of trust to diversify away from more volatile crypto assets.
DAI stablecoin issuer Sky (formerly MakerDAO) aims to leverage the trend by onboarding up to $1 billion in tokenized US Treasury bills and bonds this year. Its governance token MKR hit a three-year high last year on news of the move.
In August 2024, MKR was up over 70% year-to-date, outperforming Bitcoin by 53% for the year-to-date and Ether by 51%.
How will the RWA tokenization market evolve this year? ALTAVA’s Thongsrinoon believes the democratization of access to previously illiquid and high-value assets means tokenized real estate, commodities, and private equity will see substantial interest.
“These asset classes offer the potential for high returns and diversification, making them attractive to both institutional clients and retail users.”
Zoth’s Prittam Dutta told Reuters that he expects this years’ interest rate cut cycle by the US Federal Reserve to make tokenized US Treasuries less attractive due to falling yields.
This could help tokenized corporate bonds shine, he added, one reason why Zoth is set to launch a tokenized liquid note with exposure to both corporate bonds and T-bills soon.
“Corporate bonds are particularly appealing as a high-quality yield alternative in a low-interest-rate environment, especially with the Federal Reserve hinting at potential rate cuts later this year.”
From supercars to precious metals, offline-world treasures are rapidly moving on-chain, transforming how they’re owned, managed and traded. Boston Consulting Group estimates the total value of tokenized RWAs could reach $16 trillion by 2030. Standard Chartered thinks $30 trillion is possible.
In an analysis published for its 10th Digital Money Symposium, Citigroup said tokenization presents investors with the ultimate application for cryptocurrencies and blockchain.
“Almost anything of value can be tokenized and tokenization of financial and real-world assets could be the killer use case blockchain needs to drive a breakthrough.”
Crypto has long been criticized for failing to find the right product-market fit. With some of the Wall Street’s biggest institutions wading in, RWA tokenization could change the narrative.
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