This is one of the most important megatrends in the cryptocurrency sector.
When the shipping container debuted in 1956, it looked like little more than a steel box. Yet standardized containers soon rewired global trade by letting cargo move from trucks to ships to trains without repacking.
Similarly, tokenization aims to do something just as radical for ownership records by imprinting an asset’s paperwork onto a crypto token that can live on any blockchain where code can run. And it’s the promise of this concept that’s the reason investors keep hearing about real-world asset (RWA) tokens for everything from U.S. Treasuries to stocks to real estate.
The hype about the sector is loud, but it’s also just starting to pick up speed, so let’s take a few minutes to understand why RWAs are worth knowing about.
Image source: Getty Images.
What tokenization really means
First, let’s clarify our nomenclature a bit. Think of a token as a deed written in code. Instead of a courthouse filing cabinet, the deed sits on a blockchain, recording who owns what and under what conditions. It isn’t necessarily easy to exchange such a token for an actual deeded claim, but in theory, owning the token is the same as having the deed for the right to control the underlying asset.
Stablecoins are the most familiar RWA, but they are just the gateway. Treasury bills, private credit, commodities, stocks, even real estate liens now have tokenized versions. The value of such assets already tokenized on public blockchains is at about $21.4 billion as of July 29.
That figure looks puny next to forecasts. Boston Consulting Group (BCG) projects a total of $16.1 trillion of tokenized assets by 2030, or roughly 10% of global gross domestic product (GDP). That implies a compound annual growth rate (CAGR) near 148% from today’s base.
The pitch to asset issuers is relatively simple: Automate back-office drudgery, broaden token distribution to a 24/7 market instead of potentially highly illiquid and fragmented markets, and unlock fractional ownership if it isn’t already widespread in the asset class. The pitch to investors is even simpler: Higher efficiency can shave transaction fees, slash red tape, and widen access to income-producing instruments previously walled off by minimum purchase sizes.
Notably, while these promises look extremely likely to be proven true in the near future, they are not yet, and they may not ever be, proven for every asset class.
Aside from that, there are a couple of issues with tokenization right now. Transaction settlement finality across jurisdictions, anti-money-laundering (AML) checks, and tax treatment remain largely unaddressed contingencies, but they won’t be forever. Regulators are watching closely, and compliance standards differ from chain to chain.
For most individuals, owning RWA tokens is unnecessary right now. The smarter play is identifying which blockchains are the most likely to capture the coming flood of institutional assets. And there are already a handful of decent contenders at the table.
Three chains are positioned to benefit from this trend
The current leaderboard for RWA tokenization winners starts with Ethereum (ETH -5.90%).
By value, about 55% of all tokenized RWAs, stablecoins included, sit on Ethereum, thanks to its sprawling ecosystem of custody, compliance, and lending tools, all of which are continuously evolving to meet the needs of its largest-in-class decentralized finance (DeFi) segment. That dominance could persist because big institutions prefer deep liquidity and familiar (if highly imperfect) infrastructure. Yet Ethereum’s gas (user) fees spike when traffic is heavy on the network, and full-stack compliance (like built-in restrictions) still relies on third-party smart contract templates rather than built-in solutions.
Rising fast is Solana (SOL -7.03%) due to its high speed and low costs, two traits asset managers love when minting high-volume instruments such as U.S. Treasuries or money market tokens.
The value of RWAs on Solana has vaulted by about 140% this year to reach roughly $418 million, far outpacing the broader market’s growth, especially in the tokenized stocks segment, where it is a leader. If Solana can keep transaction fees near fractions of a cent while volumes climb, it may evolve into the New York Stock Exchange of tokenized funds.
Finally, there is XRP (XRP -7.45%), which is issued by the company Ripple.
Ripple’s engineers hard-wired regulatory compliance features like issuer freeze controls, blacklists, and compliance credentials directly into the protocol, creating a low-friction environment for banks that need to obey strict know-your-customer (KYC) and AML rules. Today XRP’s chain hosts only a sliver of the RWA market, around $114 million, but if regulators demand more built-in safeguards, its advantage could compound quickly. Furthermore, its positioning is intended to make it the preferred solution for institutional investors, so it will likely have an advantage in onboarding their capital over time.
For investors deciding how to ride the wave of this trend, remember that tokenization will be lifting chains that:
- Deliver good compliance infrastructure
- Maintain a large population of developers
- Keep transaction costs low enough to be almost insignificant, even at large scales
The state of play here is that Ethereum checks the second box, Solana the latter two, and XRP the first and last. There’s an opportunity here to own the digital ports collecting tolls as global finance loads its cargo into blockchain containers.
Assuming the forecasts about the scale of tokenized RWAs are even half right, owning a slice of the winning infrastructure is going to be very rewarding. Diversifying across this trio of leaders is a decent way to ensure you get a return from whichever coin wins a given segment of the market for RWA tokenization.