Revolution—Not Evolution: Detangling tokenization of RWAs

This article was originally published by Sandy Kaul in the "Revolution—Not Evolution" LinkedIn Newsletter.

Introduction

Interest in using programmable tokens as the Next Gen wrapper for investible assets is gathering steam as regulations become clearer and as trust and comfort in the underlying crypto technologies gain ground. Assets being targeted for such tokenization include stocks, bonds, funds, ETFs, commodities, private equity, private credit, real estate and other types of private funds. Broadly, many in the industry refer to these as “real world assets” or RWAs.  This is to help differentiate these types of tokenized investments from natively tokenized cryptocurrencies or alt coins that provide exposure to projects and protocols originating from the crypto ecosystem.

Estimates released in early 2026 show that RWA tokenization is exploding—growing an estimated 5x since 2023 and 3x between 2025 and 2026 alone.¹ From an estimated value of US$5 billion in 2023, estimates now put on-chain value at more than US$25 billion with private credit, treasury products and real estate accounting for the bulk of those holdings.² Such explosive growth is actually seen accelerating. Forecasts put the total assets in tokenized RWAs as high as US$4 trillion to US$16 trillion by 2030, with some citing figures as high as US$30 trillion by 2033.³

Regardless of the actual figure, the number of announcements from key industry participants about their tokenization plans certainly seem to support sharply higher forecasts.

Early entrants light the flame

Tokenization of real-world assets is not new. Franklin Templeton launched the first tokenized money market fund in April 2021, and this product has been running 24/7/365 since that time with total assets under management of nearly US$1.5 billion across our Benji Technology Platform. 

Attention shifted, however, when tokenization moved from government bonds and money market funds into stocks. Early entrants into tokenized stock trading helped to ignite interest and accelerate the pace of RWA tokenization. 

Robinhood kicked the race off, announcing in June 2025 that they would offer more than 200 tokenized US stocks to customers in the European Union. Robinhood chief executive officer Vlad Tenev noted that “tokenization is like a freight train. It can’t be stopped, and eventually it’s going to eat the entire financial system.”⁴

Kraken, a cryptocurrency exchange, soon followed, launching xStocks in June 2025 on the Ethereum and Solana blockchains for investors outside the United States, United Kingdom or other restricted jurisdictions. In the following nine months, the xStocks program recorded US$3.6 billion in on-chain transaction volume and about US$25 billion in total trading volume across exchanges, with about US$225 million in tokenized assets held across ~80,000 blockchain wallets.⁵ 

Ondo Global Markets came out with 200+ tokenized stocks in September 2025 and had surpassed US$500 million in total value and more than US$7 billion in cumulative trade value during the platform’s first six months of activity. This augments the US$2+ billion that Ondo Finance holds in total value locked for its tokenized US treasury products.⁶

Traditional US participants take up the challenge

While these actions from emerging and retail-focused participants garnered attention and interest, it was a subsequent set of announcements from top institutional providers that signaled to the industry that a new era is dawning for how we trade and manage regulated securities. Indeed, such announcements herald the most significant changes in how securities will likely operate since book order entry was introduced in the early 1970s.

The Depository Trust Clearing Corporation (DTCC) received a No-Action letter from the Securities Exchange Commission in December 2025, paving the way for them to offer DTC-custodied tokenized real-world assets beginning in the second half of 2026.⁷

The New York Stock Exchange (NYSE) announced the development of a platform for the trading and on-chain settlement of tokenized securities, including 24/7 operations, instant settlement, orders sized in dollar amounts and stablecoin-based funding.⁸

Nasdaq announced a partnership with the parent company of crypto exchange Kraken that will feature the launch of a specialty equity token design for public companies that allow issuers to enable programmable investor engagement and automated corporate actions, such as proxy voting and dividend payments. These innovations are expected to go live by early 2027.⁹

Differentiating tokenization approaches

Excitement about tokenization is building, but there is a lot to unpack to fully understand how tokenization may impact the financial services industry.

There are three types of tokenized products that are all likely to come to market in the coming months:

• Digitally native tokenized products: These tokens provide direct exposure to the underlying assets whether a stock, a bond, a commodity or a fund. The token entitles the holder to the full ownership rights and protections associated with the assets embedded in the token. Ownership is recorded on a single, on-chain ledger. No off-chain record of ownership exists. Settlement of these products is done atomically with payments and assets changing hands immediately upon a transaction being verified. Franklin Templeton’s tokenized money market fund is an example of this type of tokenized offering.
• Synthetic exposure tokens: These are also digitally native offerings, but rather than the token providing direct exposure to the underlying asset, the token operates more like a swap, providing pass-through of the economic outcomes generated by the underlying asset. Token holders do not possess ownership rights, nor investor protections linked to the underlying assets. Instead, the token holder owns shares of a special purpose vehicle that houses the underlying assets. These can also be seen as “wrapped” or “backed” investments. Ownership of the tokens is tracked via a single, on-chain ledger. And like digitally native products, payments and tokens are exchanged immediately when a transaction is verified. The tokenized stocks being offered by Robinhood, Kraken and Ondo are examples of this type of tokenized offering.
• Digital twin tokens: These tokens do not provide direct exposure to the reference asset. Instead, ownership of the asset is awarded and recorded in traditional, off-chain form (e.g., shares of limited-parternship interests) and the token functions as a “receipt” showing that the token holder owns the off-chain asset. These offerings require two ledgers. The actual ownership record is tracked in off-chain, legacy systems that typically require an overnight batch process to update. Tokens are tracked in a separate ledger held on-chain. Tokens are minted when a position is established and/or verified in the off-chain ledger. As such, these transactions are subject to traditional T+1 or more settlement and net asset value cycles to update. Tokens are burned and cease to exist when the positions are exited. The planned issuances from the DTCC, NYSE and Nasdaq are examples of this type of tokenized offering.

Permissionless vs. permissioned tokens

Each of these tokenization models require that the transfer agent who verifies these transactions and maintains the ownership record undertake a new type of compliance process called Know Your Token (KYT). This process examines the blockchain wallet addresses that are looking to purchase or sell tokens and tracks what wallets the token has transited through in its recent activity. This review is aided by the blockchains themselves that typically white label wallets, indicating that the wallet is not showing up on any restricted list and that the wallet holder has provided sufficient information to verify their eligibility to send and receive that type of transaction.

Beyond this KYT check, synthetic exposure tokens do not require any additional verification of the wallet holder. For this reason, these are deemed to be “permissionless” tokens. If the smart contract terms dictate that only investors outside the Unite States can own this token, and the wallet is verified via the KYT process as being held by an owner outside the country, the transaction can go through.

Digitally native products that provide direct exposure and digital twins are by contrast considered “permissioned” tokens. Simply knowing about the wallet is insufficient. These token holders must be verified by a full Know Your Customer/Anti-Money Laundering screening (KYC/AML).

How the utility of different token models differ

Understanding how the token provides exposure to real-world assets and whether the token is deemed permissioned or permissionless is critical in determining what use cases the token can support.

Synthetic exposure tokens offer the most utility in the crypto ecosystem, but the least protection in terms of investor rights. These tokens can move from any wallet to any other wallet that meets the KYT criteria. As such, they can be readily transferred between wallet owners and can be posted into decentralized financial protocols (DeFi) as assets or collateral. This allows token holders to find liquidity 24/7/365 for their tokens and to potentially earn additional fees, spreads or yield. However, token holders cannot vote on any issues affecting the underlying real-word asset and economics generated by the underlying assets (e.g., yield, dividends) are awarded on a pass-through nor direct basis to the token holder, thus making them fully reliant on the token issuer. As such, in most instances, the token holder would not have any claim on the issuer of the underlying asset.

Digitally native RWA tokens offer the next highest level of utility in the crypto ecosystem but are more restricted in their use. These tokens can move from wallet to wallet, but because they are permissioned, they can only move across wallets that have gone through both KYT and KYC/AML verifications. Token holders are the official owners of the RWA and, as such, they get the full ownership rights including voting rights on their holdings and the direct award of economic benefits. Unlike synthetic exposure tokens, it is difficult to use these tokens in DeFi since tokens pledged to DeFi protocols are co-mingled into a single pool rather than being held by a specific wallet address.

Where digitally native RWA tokens are proving highly effective, however, is for use as collateral for financing arrangements and derivative transactions. Token holders benefit from enhanced on-chain liquidity and instant settlement. Moreover, since the official ownership record is on-chain and the shareholder record is being compiled second-by-second, token holders get benefits that are not possible to provide in the digital twin model. For example, Franklin Templeton’s tokenized money market fund starts paying interest to the token holder the moment the position is established and pays out yield daily via incremental new token issuance directly into an investor’s wallet. This is not possible with tokens issued via the digital twin model.

Indeed, digital twin RWA tokens offer the least utility of the current models. These tokens are tied to an off-chain ownership record, and the administration of rights and benefits is thus performed by legacy systems. Distributions are made via fiat currency (not incremental new token issuance) into traditional investment accounts (not wallets) on current payment schedules (e.g., yields paid at the end of a month for a money market fund). Tokens are receipts linked to specific shares or interests held in off-chain ledgers and, as such, they cannot be transferred between wallets. Tokens are minted when an investor subscribes and are burned when that investor redeems.

Even digital twin RWA tokens, however, should enable increased transparency into investor holdings since the token records the holder’s receipt of ownership and sits directly in the investor’s wallet rather than in a book-keeping entry in a database held by an intermediary. Moreover, having these assets in tokenized form should facilitate 24/7/365 trading and allow for real-time updates to the token records even if the official off-chain ownership records lag in recording such activity.

A step in the right direction

Each type of RWA tokenization model offers benefits and new types of utility over today’s approach that has dominated securities and fund processing for the past 50 years. All the approaches leverage the latest blockchain technologies and tokens themselves can operate as “smart” wrappers that can allow for many operational processes to be embedded into the token itself and automatically executed. Each model provides increased transparency into an investor’s holdings, thus making it easier to utilize assets for collateral. Some of the models are even enabling new types of utility that can result in more accrual of benefits or new earnings opportunities.

Most importantly, by tokenizing RWAs, the entire financial industry—from those that have previously been seen as crypto natives to traditional financial players—will now be looking to converge on common infrastructure. Wallets are likely to become the key financial interface for individuals and institutions and today’s surge in RWA tokenization is the bridge to help drive that change.