Tokenization of Real-World Assets (RWA)

Conceptual illustration of real-world assets and their digital representations.

Real-world asset tokenization (RWA tokenization) is the representation or issuance of assets as digital tokens on a programmable ledger. It can connect financial instruments and physical assets with blockchain applications, including decentralized finance (DeFi). A token's economic value and the holder's rights depend on the underlying asset and the legal arrangement, as well as the technology used.

What is RWA Tokenization?

Tokenization can create a digital representation of an existing asset or issue an instrument directly on a programmable platform. Tokens may represent an ownership interest, a creditor's claim, a fund share or a right to specified cash flows. The OECD distinguishes representations of existing assets, sometimes called digital twins, from assets issued natively in tokenized form. Holding a token does not necessarily confer ownership of the underlying asset.

Fractionalization divides an interest into smaller units. For example, an arrangement could divide a property-owning company's equity into 1,000 equal tokenized units; the company would still hold the property, while investors would hold the rights specified for those units. This is an illustration, not a description of a particular offering. Fractionalization changes the investment unit, rather than automatically changing the property's legal title.

Legal and operational structure

A tokenized arrangement needs more than a token contract. A Federal Reserve staff paper identifies the reference asset, the ledger, a valuation mechanism, custody and redemption arrangements as key design elements. Physical assets generally require off-chain agents to value and safeguard them. A company, fund or other legal vehicle can hold the asset while tokens represent interests in that vehicle.

Issuance, secondary trading and redemption are distinct processes. Transferring a token to another wallet is not necessarily the same as obtaining cash or delivery of the reference asset from its issuer. Tokenized instruments can retain custodians, fund administrators and securities depositories. Their records and settlement processes must be coordinated with the ledger.

Technology Behind RWA Tokenization

A ledger records tokens and transfers; smart contracts can apply transfer rules and execute transactions when specified conditions are met. Some systems use public blockchains and others restrict participation. An on-chain record does not by itself establish the accuracy of an off-chain valuation or the existence of a physical asset.

Ethereum token interfaces illustrate different technical choices:

• ERC-20 defines an interface for interchangeable tokens, including balances, transfers and spending approvals.
• ERC-721 identifies distinct, non-fungible tokens. It can identify a unique item or right, but does not prescribe the off-chain legal rights associated with that identifier.
• ERC-1155 supports multiple token types within one contract, including fungible and non-fungible types and batch transfers.
• ERC-3643 adds a permissioned framework compatible with ERC-20. Its identity registry and compliance checks can restrict transfers to eligible recipients.

Oracles and other data providers supply information that a contract cannot obtain directly, such as off-chain prices. Their accuracy and governance affect the reliability of valuations. Blockchain execution does not eliminate reliance on these providers.

Types of Assets That Can Be Tokenized

Real estate

Tokens can represent interests in an entity that owns residential or commercial property, rather than a direct entry in a land register. Depending on the offering, those interests can include rights to income or sale proceeds. Real estate remains difficult to value and comparatively illiquid; property-specific legal and tax arrangements still apply.

Commodities

Commodity tokens connect digital units with stored goods or claims on those goods. Paxos's PAX Gold terms describe each PAXG as representing one fine troy ounce of London Good Delivery gold, including proportional interests in allocated bars. Custody, eligible redemption methods and applicable conditions remain part of the arrangement. Agricultural commodities have also been tested: in March 2022, Santander and Agrotoken announced work on loans secured by tokens linked to soybeans, corn and wheat.

Financial instruments

Bonds, equities and investment-fund interests can be issued or represented as tokens. Their financial exposure may differ: a tokenized bond, a share in a fund holding bonds and a third-party instrument tracking bond prices are not interchangeable legal claims. In January 2026, US Securities and Exchange Commission staff distinguished issuer-sponsored tokenized securities from third-party custodial and synthetic models. The statement notes that third-party tokens may confer different rights and additional counterparty or bankruptcy risks. These are staff views on US securities law, not a ruling covering every jurisdiction.

Art and other unique assets

OECD research includes art among non-financial assets considered for tokenization. A token may identify an item or represent a financial interest connected to it; identifying an artwork on a ledger is distinct from acquiring ownership or intellectual-property rights. The associated legal agreement determines the rights being offered.

Benefits of RWA Tokenization

Potential benefits depend on system design and use:

• Accessibility: smaller investment units can reduce the capital needed to obtain an interest in an asset. Investor eligibility rules can still limit access.
• Transferability and liquidity: digital transfers can make interests easier to exchange, but liquidity also requires buyers, trading venues and workable redemption arrangements.
• Recordkeeping and transparency: shared records can improve visibility and reduce reconciliation work. Visibility depends on access controls; a tokenized system need not expose all information publicly.
• Programmability: contracts can coordinate conditional transfers, payments and other operations, reducing some manual steps.

The BIS describes such benefits as potential and notes that many remain unproven or involve trade-offs.

For securities settlement, delivery-versus-payment can coordinate the transfer of an instrument with payment. A shorter settlement cycle can reduce some exposures, but instant settlement can increase the need to have cash and securities available immediately. The OECD therefore cautions that immediate settlement is not necessarily preferable for every participant.

Challenges and Risks

• Legal rights and enforcement: token ownership, ownership of the reference asset and enforceable rights against an issuer can differ. Securities, property and other applicable rules continue to matter.
• Custody and counterparties: a ledger cannot prevent an off-chain custodian or issuer from failing. Holders depend on the arrangements safeguarding the reference asset and establishing their claim.
• Liquidity and redemption: an asset that trades as a token can remain difficult to sell or redeem. Promising liquid tokens against illiquid reference assets can create redemption pressure.
• Valuation and technology: unreliable price inputs, smart-contract errors and compromised private keys can impair an arrangement. Links between protocols and repeated use of collateral can add leverage and transmit losses.
• Adoption and interoperability: fragmented platforms, integration costs, limited market participation and incompatible systems can restrict deployment. These are barriers to be assessed, not problems automatically solved by issuing a token.

A 2025 BIS working paper studying US real estate tokenization found that liquidity during shocks depended on platform buyback features, which also brought higher platform insolvency risk. The finding illustrates a particular institutional trade-off; it is not evidence that every tokenized property has a liquid secondary market.

RWA Tokenization in DeFi

Compatible tokens can be traded through blockchain applications or accepted as collateral for borrowing. Fund or debt tokens can connect cash flows from off-chain investments with on-chain financial services. The permitted use depends on the instrument and protocol: eligibility and transfer restrictions can prevent a token from being usable by every wallet or liquidity pool.

Returns can originate from the reference investment, such as interest or property income; tokenization itself does not create that cash flow. Combining an instrument with lending or other protocols introduces additional contractual and technical dependencies. The FSB identifies composability and repeated collateral use as possible sources of leverage and interconnectedness.

Examples of RWA Tokenization

Centrifuge

Centrifuge provides infrastructure for tokenized asset-management products. Its documentation distinguishes the protocol from the asset manager: the manager operates the product and sets its terms. Tokens represent positions in particular share classes, and redemption follows the product's order-processing arrangements. Products can have different eligibility and wallet-approval requirements, so Centrifuge products do not all offer the same rights or liquidity.

MakerDAO and Sky

MakerDAO developed RWA collateral arrangements within its stablecoin protocol. Its RWA documentation describes tokens used to account for off-chain assets, with enforceable rights relying on legal documents, counterparties and custodians. A 2024 Federal Reserve Bank of New York research article, using an analysis cutoff of June 2023, describes short-term Treasury securities backing DAI. That analysis documents a historical connection to traditional finance; it does not establish current holdings. MakerDAO rebranded to the Sky ecosystem in 2024.

Ondo Finance

Ondo offers tokenized investment products, including OUSG. Its OUSG documentation describes interests in an investment fund with eligibility and onboarding requirements, rather than direct ownership of individual Treasury bills. Access is limited to qualifying investors. The fund's investments, subscription methods and redemption arrangements are product-specific; descriptions of its launch portfolio should not be treated as current holdings.

RealT

RealT describes RealTokens as interests in an LLC or corporation that owns a property's deed, with separate tokens for individual properties. Eligible holders obtain the rights specified by the offering, not the property's deed directly. RealT also requires registered, approved wallet addresses for transfers, with eligibility assessed for each property. The Federal Reserve's 2023 study independently describes the use of property-owning LLCs in this model.

Institutional Bond Issuance

The European Investment Bank launched a €100 million, two-year digital bond in April 2021 using Ethereum for registration and settlement.

The UK DIGIT pilot

On 6 October 2026, HM Treasury appointed Barclays, HSBC, Lloyds, Morgan Stanley, NatWest and RBC Capital Markets as joint lead managers for the Digital Gilt Instrument (DIGIT), a digitally native UK government-bond pilot. Their responsibilities include underwriting, investor engagement and distribution.

The pilot was expected by the first quarter of 2027. The announced design is short-dated, uses a platform within the Digital Securities Sandbox, includes on-chain settlement and is separate from the government's main debt management programme. The announcement describes preparations for issuance; it does not establish that a bond has already been issued.

Future Prospects for RWA Tokenization

Development depends on enforceable rights, reliable custody, suitable settlement assets, interoperability and viable market participation. The OECD's 2025 assessment found limited adoption and fragmented deployment despite substantial experimentation. This dated assessment of barriers does not establish a future market size.