In today’s newsletter, Redstone’s Marcin Kazmierczak walks us through the evolution of tokenization as it moves from “concept to allocation.”
Next, in “Ask an Expert,” Kieran Mitha answers investors’ questions about tokenized investments.
-Sarah Morton
Where are tokenized assets located today
Tokenization moves 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 questions about tokenized assets, and this trend will only accelerate.
Over the past 18 months, companies like BlackRock, Franklin Templeton, and Fidelity Investments have launched real products on the blockchain, including Treasury funds and private credit strategies. Investors are taking note. The numbers are growing, the news is easy to follow, and the basic idea is simple: bonds, private credit, and money market funds are now available on-chain, without traditional intermediaries, and settlement becomes much faster.
This summary is mostly accurate, but it doesn’t tell the whole story.
The technology to create tokens has never been the main challenge. The real test comes later, with decisions on compliance, identity, transfer rules, sanctions and lifecycle management. These are the areas where most projects are slowing down and the market is currently evolving.
Last month, the RedStone research team released the 2026 Tokenization and RWA Standards Report, which examines how these systems are actually built.
The question of compliance is a question of architecture
For issuers, the most important choice is not which blockchain to use, but where to place compliance rules.
Compliance can be built directly into the token and enforced by smart contracts on every transfer. It can also be managed outside of the token using tools such as whitelisting. Another option is to enforce compliance at the network level, where the blockchain itself decides which transactions are permitted.
Each method solves one problem but creates another.
Identity verification frameworks for tokenized assets, source: Tokenization Standards Report
Placing compliance rules in the token gives you exact control, but it makes the system less flexible. For example, updating a sanctions list or rule may require a contract upgrade, turning a simple policy change into a technical task. Managing compliance outside of the token makes things more flexible, but it means relying on intermediaries and can expose assets if they leave their original environment. Enforcing rules at the network level makes token design easier, but limits the ease with which the asset can be moved to other chains and systems.
For advisors, this is not an abstract design choice. This directly affects the behavior of an asset. It determines whether it can cross chains, integrate with top-tier decentralized finance (DeFi) protocols, like Morpho or Aave, and serve as collateral in a lending strategy. Two tokenized funds with identical underlying assets can behave very differently based on this architectural decision alone.
Institutional capital already moves on-chain
The transition from theory to practice is particularly evident in the way 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 posts a token asset as collateral, borrows against it, and redeploys the borrowed capital, often in 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 executed without a prime broker – faster, cheaper and with less friction.
How investors allocate these assets increasingly reflects broader market trends.
On one major protocol, token exposure to Treasury declined sharply, while token gold allocations increased several-fold over the same period, tracking changes in rate expectations with remarkable precision. This is the best showcase of how professional capital responds to macro signals via on-chain infrastructure.
For advisors, this reframes the role of tokenized assets. It’s not just about wrapping existing products. In the right structure, they become productive collateral, capable of generating additional yield and participating in broader strategies while remaining in the portfolio.
Credit risk becomes explicit
As these assets evolve into lending and structured strategies, credit risk evolves alongside specific DeFi strategies, such as loopback. Emerging DeFi risk assessment frameworks like Credora introduce continuous on-chain risk assessment, bringing a level of transparency that traditional markets rarely provide.
For advisors, this shifts the question from what the asset represents to how it behaves under stress and what risks it carries. Easy-to-understand ratings on a familiar scale from A+ to D make it easier to create a risk-adjusted portfolio, attracting more and more interested parties.
What remains unresolved
Some structural gaps remain. Securities transactions still rely largely on off-chain processes, and illiquid assets such as private credit and real estate are not yet fully compatible with DeFi standards.
Until these issues are resolved, tokenization will continue to evolve unevenly, with more complex assets lagging behind simpler ones. The good side? The creators of tokenization frameworks are well aware of this limitation, and we should soon see solutions to fill this gap.
Sanctions control approaches in tokenized assets, source: Tokenization Standards Report
– Marcin Kazmierczak, co-founder, Redstone
Ask an expert
Q: As tokenization moves from pilot programs to actual financial infrastructure, what needs to happen for it to become a standard layer in global capital markets?
Tokenization becomes the norm when it integrates with existing financial systems rather than competing with them. The priority is interoperability between blockchains, custodians and traditional market infrastructures so that assets can flow seamlessly between platforms.
Regulatory clarity is equally essential. Institutions must have confidence in property rights, settlement finality, and compliance frameworks before allocating significant capital. We are already seeing the beginnings of traction, but the scale will come when tokenized assets match or exceed the efficiency, liquidity and reliability of traditional securities. At this stage, tokenization will not be considered an innovation. It will simply be the infrastructure that underpins modern markets.
Q: What are the most overlooked risks or misconceptions surrounding tokenized assets today?
One of the most common misconceptions is that tokenization automatically creates liquidity. This is not the case. It just makes assets easier to access. Take the example of real estate. You can tokenize a property and divide it into thousands of shares, but if there are no active buyers or sellers, those shares will still be difficult to trade.
Another challenge is that the market is still early. Different platforms build their own ecosystems, which can lead to fragmented liquidity rather than a unified market.
Technology is evolving rapidly, but infrastructure, regulation and investor participation continue to catch up. It is in this gap between what is possible and what is practical that most of the risks lie today.
Question : For retail investors, does tokenization open the door to new types of investments, and could it be a catalyst for attracting younger generations to the market?
Tokenization is emerging as younger generations move toward higher-paying careers and take a more active role in managing their wealth. Having grown up in a context of rapid technological change myself, this group naturally expects financial systems to evolve in the same way as everything else in their lives.
This mindset leads to a greater willingness to explore asset classes beyond traditional stocks and bonds. Tokenization can open up access to areas such as private markets and real estate, while providing a more digital and flexible investment experience.
It’s not just about new opportunities, but also about alignment. As the financial sector modernizes, it begins to reflect the speed, transparency and accessibility that young investors are accustomed to. This shift will likely play a significant role in attracting a new generation to investing.
– Kieran Mitha, Marketing Coordinator
