In today’s newsletter, Redstone’s Marcin Kazmierczak walks us through the evolution of tokenization from “conception to distribution.”
Then, on Ask the Expert, Kieran Mitha answers investor questions about tokenized investing.
——Sarah Morton
The current state of tokenized assets
Tokenization is moving from concept to distribution. What matters now is how these assets fit into a portfolio and what they can actually achieve.
Your customers are already hearing about and asking about tokenized assets, and this trend is only accelerating.
Over the past 18 months, firms including BlackRock, Franklin Templeton and Fidelity Investments have launched actual products on the blockchain, including treasury funds and private credit strategies. Investors are taking notice. The numbers are rising, the news is easy to track, and the basic idea is simple: Bonds, private credit, and money market funds can now all be used on-chain without the need for traditional intermediaries, and settlements are orders of magnitude faster.
This summary is largely accurate, but it doesn’t tell the whole story.
The technology of creating the token has never been the main challenge. The real test comes later, including decisions on compliance, identity, transfer rules, sanctions and lifecycle management. These are the areas where most projects have slowed down and where the market is currently developing.
Last month, RedStone’s research team released the Tokenization and RWA Standards 2026 report, which examines how these systems are actually built.
Compliance problem is an architectural problem
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 with every transfer via smart contracts. It can also be managed externally to 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 allowed.
Each approach solves one problem but creates another.
Authentication structure for tokenized assets, source: Tokenization Standards Report
Putting compliance rules into tokens gives you precise control but makes the system less flexible. For example, updating sanctions lists or rules may require upgrading contracts, turning simple policy changes into technical tasks. Managing compliance outside of the token makes things more flexible, but it means relying on middlemen and potentially exposing assets if they leave the original environment. Enforcing rules at the network level makes token design easier, but it limits how easily assets can be transferred to other chains and systems.
For consultants, this is not an abstract design choice. It directly affects the way an asset behaves. It determines whether it can be moved across chains, integrated with blue-chip decentralized finance (DeFi) protocols such as Morpho or Aave, and used as collateral in lending strategies. Based on this single architectural decision, two tokenized funds with the same underlying assets could perform very differently.
Institutional capital has begun to join the chain
The shift from theory to practice is most evident in how tokenized assets are used in lending markets.
Deposits of real-world assets tokenized in DeFi lending protocols have exceeded $840 million. Much of this activity follows a familiar structure: investors put up a tokenized asset as collateral, borrow against that asset, and then redeploy the borrowed capital, often into 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.
In one major agreement, tokenized Treasury exposure fell sharply, while tokenized gold allocations expanded several times over the same period, tracking changes in interest rate expectations with remarkable accuracy. This is the best demonstration of how professional capital responds to macro signals through on-chain infrastructure.
For advisors, this redefines the role of tokenized assets. They are more than just packaging for existing products. In the right structure, they become productive collateral, able to generate additional yield and participate in broader strategies while remaining in the portfolio.
Credit risk becomes increasingly apparent
As these assets enter lending and structuring strategies, credit risk evolves with specific DeFi strategies such as rotations. Emerging DeFi risk rating frameworks like Credora introduce continuous on-chain risk assessment, bringing transparency rarely provided by traditional markets.
For advisors, this shifts the question from what the asset represents to how the asset performs under stress and the risks it poses. Easy-to-understand ratings on a familiar A+ to D scale help create risk-adjusted investment portfolios that appeal to a growing number of interested parties.
unresolved issues
Some structural gaps remain. Corporate behavior still relies heavily on off-chain processes, and illiquid assets such as private credit and real estate have not yet fully met DeFi standards.
Until these issues are resolved, tokenization will continue to scale unevenly, with the most complex assets lagging behind the simplest. The bright side? The creators of the tokenization framework are well aware of this limitation, and soon we should see solutions to address this gap.
Sanctions Screening Methodology for Tokenized Assets, Source: Tokenization Standards Report
-Marcin Kazmierczak, Co-Founder, Redstone
Ask the experts
Q: As tokenization moves from pilot projects to real-time financial infrastructure, what needs to happen for it to become a standard layer in global capital markets?
Tokenization becomes the standard when it integrates into existing financial systems rather than competing with them. The top priority is interoperability between blockchain, custodians and traditional market infrastructure so that assets can move seamlessly across platforms.
Regulatory clarity is equally important. Institutions need confidence in ownership, settlement finality and compliance frameworks before allocating significant amounts of capital. We are already seeing early traction, but scale will come when tokenized assets meet or exceed the efficiency, liquidity, and reliability of traditional securities. Until then, tokenization will not be considered an innovation. It will simply be the infrastructure that supports modern markets.
Q: What is the most overlooked risk or misconception about tokenized assets today?
One of the biggest misconceptions is that tokenization automatically creates liquidity. This is not the case. It just makes the assets more accessible. Take real estate as an example. You can tokenize a property and divide it into thousands of shares, but the shares will still be difficult to trade without active buyers and sellers.
Another challenge is that the market is still in its early stages. Different platforms are building their own ecosystems, which may lead to fragmented liquidity rather than a unified market.
The technology is advancing rapidly, but infrastructure, regulation and investor engagement are still catching up. The gap between possibility and reality is where most risk exists today.
ask: For retail investors, does tokenization open the door to new types of investments, and could this be a catalyst to attract younger generations to the market?
Tokenization is on the rise as younger generations enter high-paying careers and take a more active role in managing wealth. Having grown up around rapid technological change myself, this group naturally expects financial systems to evolve like everything else in their lives.
This mentality has led 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 new opportunities, it’s alignment. As the financial industry modernizes, it begins to reflect the speed, transparency and accessibility that young investors are accustomed to. This shift could play a meaningful role in attracting a new generation of investment.
– Kieran Mitha, Marketing Coordinator
