What is the tokenization of real-world assets?

#What does 'tokenization' mean in plain English?

Every financial asset already lives in a record book. Your shares sit in a register kept by a company's registrar or a securities depository, and a bond's owners are tracked by banks and custodians. Tokenization moves that record onto a programmable platform, usually a distributed ledger. The BIS defines it as the process of recording claims on real or financial assets that exist on a traditional ledger onto a programmable platform⁠^[1]. IOSCO, the global body of securities regulators, uses a similar definition: the creation, issuance or representation of assets on a digital token ledger or a programmable platform⁠^[2].

A real-world asset (RWA) is simply something that exists outside the blockchain: a government bond, a share in a money market fund, a loan, a building or a bar of gold. The token is a digital entry that says who has a claim on it. The asset itself does not move onto the blockchain; only the record of who owns it does.

#Why would anyone tokenize an asset?

Supporters point to three ideas. First, faster settlement: if both the asset and the payment are tokens on one platform, they can swap at the same moment. The BIS's 'unified ledger' vision brings tokenised central bank reserves, commercial bank money and financial assets onto the same venue for this reason⁠^[1], and the BIS Project Agorá is testing tokenised commercial bank deposits together with tokenised central bank reserves for cross-border payments⁠^[3]. Second, programmability: rules such as who may hold an asset can be written into the token. Third, smaller slices: one asset can be split into many tokens.

Small slices are only useful if there is a buyer when you want to sell, and if the legal vehicle really holds the asset. A token can be split finely and still be hard to sell.

#How big is the tokenized asset market really?

Much smaller than the headlines suggest. IOSCO noted in November 2025 that the $10 billion of tokenized bonds issued over the last decade remains relatively small compared with the $140 trillion of bonds outstanding globally⁠^[2]. It also cited an estimate that tokenized public stocks had a market capitalisation of nearly $16 million by March 2025⁠^[2]. The Financial Stability Board (FSB) concluded in 2024 that adoption is very low but appears to be growing, and that because of its small scale tokenisation does not currently pose a material risk to financial stability⁠^[4].

The 0.007% figure is our own calculation from IOSCO's two numbers: $10 billion divided by $140 trillion. Put another way, for every dollar of tokenized bonds issued in a decade, there are about 14,000 dollars of conventional bonds outstanding.

#Is a tokenized stock or bond still a security?

Yes. In the US, SEC Commissioner Hester Peirce put it bluntly in July 2025: tokenized securities are still securities⁠^[5]. In January 2026 three SEC divisions added that the format in which a security is issued, or the way holders are recorded, does not affect how federal securities laws apply⁠^[6]. In the EU, MiCA does not cover crypto-assets that already fall under existing financial services law, such as those that qualify as financial instruments⁠^[7], so tokenized shares and bonds stay under securities rules; see MiCA explained.

#Who issues the token, and why does it matter?

The SEC staff statement separates two models⁠^[6]. In the first, the issuer of the security (or its agent) tokenizes it, so the token is the security. In the second, a third party unconnected to the issuer creates a token linked to a security. That can be a custodial token, which represents an indirect interest in a security held by a custodian, or a synthetic token, such as a linked security, which gives exposure to the price only.

#What can go wrong with tokenized assets?

IOSCO lists investor risks including uncertainty about the rights to and ownership of the underlying assets, unclear legal treatment of assets in token form, and operational problems such as cyber-attacks on blockchain nodes, congestion, smart contract bugs and loss of private keys⁠^[2]. The FSB adds system-level concerns: liquidity and maturity mismatch, leverage, asset price and quality, interconnectedness and operational fragilities⁠^[4]. Who holds your keys also matters; crypto custody explained covers that.