The Real World Asset (RWA) industry has been gaining traction rapidly as digital assets increasingly intersect with traditional finance.
To clarify, RWA refers to tangible assets such as real estate, commodities, and financial instruments that can be tokenized and represented on blockchain. The tokenization facilitates increased liquidity, fractional ownership and enhanced access to investment opportunities.
How does the tokenization of RWA work?
- The process begins with an RWA issuer - such as an loan issuer or fund manager - who tokenizes an asset (like loans, funds, stocks, or commodities) on a blockchain via a tokenization technology platform. Each token contains the information about the asset and its ownership, along with governing rules for transfer and settlement.
- Once deployed onchain, an embedded smartcontract automatically executes transactions when predefined conditions are met, allowing for contigent transfer of assets and claims such as paying interest, or dividends.
Source: Bank of International Settlement
Why tokenize RWAs when those assets have already been available for hundreds of years?
In US Treasury Department's FY2024 Q4 report to the Treasury Borrowing Advisory Committee, it included a dedicated session discussing the growing significance of tokenized financial market infrastructure in the US and global financial landscape.
The report highlights several key benefits of tokenization infrastructure:
- Tokenization of a variety of financial and real-word assets across interoperable ledger systems promises to unleash new economic arrangements and enhance efficiencies.
- Some markets – like international payments or repo – stand to gain immediate and large potential benefits from tokenization, while the gains for highly efficient market such as US Treasury market will be more incremental.
- Tokenizing US Treasuries will potentially bring improvements in clearing and settlement, collateral management, transparency and accountability, composability and innovation, and more accessiblity for wider range of investors, including smaller retail investors through fractionalization and those in emerging markets, as well as increase in market liquidity through trading 24/7 on blockchain networks.
Source: US Treasury Department
Mckinsey reached similar conclusions in its report, highlighting that tokenization leads to increased transparency and lower costs for asset owners and service providers, while enhancing market liquidity and capital efficiency for investors.
Source: Mckinsey
Source: rwa.xyz as of 25 Mar 2025
Several leading institutions including McKinsey, BCG, estimated that the RWA tokenization market could reach between US$2trn ~ $30trn by 2027 to 2030. (A pretty wide range of projections depending on the pace of regulatory developments and institutional adoption.)
Source: RWA Watchlist
Who are the early adopters?
In the early days, primarily crypto native firms like Ondo, Goldfinch, Hashnote, and Paxos led the tokenization of RWAs, while over past 2 years, we have seen increasing participation from leading traditional financial institutions as regulations have become clearer.
In US, BlackRock and Franklin Templeton have emerged as pioneers, launching tokenized US money market funds on multiple public blockchains, in particular the AUM of BlackRock's BUIDL has surpassed US$1.7bn in just a year after launch.
Source: rwa.xyz
In Hong Kong, the government has taken a leading role in the market by issuing 2 tokenized green bonds in 2023 & 2024 on private blockchains. Local financial institutions such as BOCI, GF Securities, UBS, HSBC, Cinda International Asset Management have issued a broad range of tokenized notes, warrants, and gold over the past 2 years, utilizing both public and private blockchain networks. Our ground check indicates a rapidly increasing interest in RWAs among local institutions and Chinese asset owners.
Meanwhile, the latest Coinbase-EY Parthenon 2025 institutional investor digital assets survey also unveiled a strong interest among global large institutional investors on tokenized RWAs as a way to diversify portfolio as well as improve operation efficiencies, with over 61% of surveyed investors considering to invest in tokenized RWAs in next 2 years.
