The world of finance is buzzing with the promise of tokenization, particularly when it comes to Real-World Assets (RWAs). Imagine fractional ownership of luxury real estate, a stake in a renewable energy project, or even a piece of a fine art collection, all managed and traded on a blockchain. It sounds like the future, doesn’t it? Indeed, the numbers are staggering: RWA tokenization surged to $35.68 billion in 2025, with projections hitting an eye-watering $2 trillion by 2028 – a 5600% growth. It’s hard not to get caught up in the hype.
But amidst this dizzying ascent, a darker undercurrent has emerged. 2025 also saw RWA protocol exploits more than double, leading to a cumulative $14.6 million in losses. The Zoth hack, which alone siphoned $8.5 million, served as a stark reminder: are we building solid infrastructure before scaling, or are we simply rushing to market in a bull cycle frenzy? The gap between the soaring potential and the sometimes-shaky reality is becoming painfully clear.
The Horse-and-Buggy Problem: Regulatory Lag Meets Digital Innovation
Part of the challenge lies in a classic “old world meets new” scenario – our regulatory frameworks simply haven’t caught up. Six months after the landmark GENIUS Act, a federal framework for stablecoins signed by President Trump, the landscape remains frustratingly fragmented. While the Act brings much-needed clarity for USD-backed payment stablecoins, it barely scratches the surface of the full asset lifecycle. Think valuation standards, custody rules, transferability, secondary trading, and reporting requirements – these crucial elements are still navigating a patchwork of inconsistent guidelines.
It’s like trying to regulate high-speed internet with rules designed for telegraphs. Indeed, critics point out that we’re applying securities laws from 1933 to blockchain-based assets, creating a “pre-digital” regulatory environment. This leaves institutions in a bind, facing differing requirements across states, custodians, and market venues.
As Alex Davis, CEO of Mavryk, wisely notes, “The GENIUS Act moves the industry forward by fixing the digital settlement layer. But RWA tokenization will only achieve mass institutional scale once there is a unified, federal regulatory perimeter that covers the full asset cycle, not just the stablecoin component.” Without this holistic approach, mass adoption remains a distant dream.
Where the Leaks Are: Not the Assets, But the Wrappers
So, where are these millions in hacks actually happening? It’s a critical distinction. Contrary to popular belief, most exploits aren’t targeting the underlying tokenized assets themselves. The real vulnerabilities emerge in the decentralized finance (DeFi) wrappers built around them, especially in permissionless yield farms.
The problem often lies in the smart contract implementation. Many protocols are still using smart contract languages and architectures that were never truly designed for institutional-grade security. These introduce attack vectors that simply don’t exist in conventional finance, leading to painful lessons.
“Most of these exploits didn’t occur in tokenized assets themselves,” Davis clarifies. “The breaches happened in DeFi wrappers built around the tokenized assets. A big part of the issue is that much of the industry is still building financial products using smart-contract languages that were never designed for institutional-grade security.” This highlights a fundamental mismatch: innovative financial products are being built on foundations that aren’t yet robust enough for the institutional capital they aim to attract.
The institutional RWA market, thankfully, is learning. There’s a clear trend towards architectures that embed compliance by design, anchor valuations in trusted oracles, maintain strong control over secondary trading venues, and feature deep-rooted custody solutions. The pressing question, however, is whether this robust institutional layer can scale and mature before retail-facing experiments, with their inherent risks, erode the sector’s credibility.
When Competitors Become Validators: The Institutional Influx
Paradoxically, some of the biggest challenges for blockchain-native platforms also serve as their greatest validation. August 2025 saw State Street anchor a $100 million tokenized deal on JPMorgan’s blockchain, a significant milestone that sent ripples through the industry. Custodians with assets totaling $49 trillion are no longer just “testing the waters.”
Giants like BlackRock, Visa, and JPMorgan are actively tokenizing assets, simultaneously validating the market’s potential and intensifying the competitive landscape. For startups, this creates a peculiar situation: institutional entry expands the total addressable market exponentially, but it also means going head-to-head with trillion-dollar behemoths. It’s a good problem to have, but a problem nonetheless.
The approaches differ fundamentally. Banks typically develop permissioned, closed systems – highly regulated, yes, but often slower to innovate. Public blockchain ecosystems like Ethereum, on the other hand, support unrestricted, permissionless innovation but lack the inherent resources and frameworks to manage governed assets effectively. Neither architecture, in its pure form, fully solves the complex interoperability puzzle.
Ultimately, this move by major custodians should be viewed less as direct competition and more as powerful validation. These institutions are endorsing the tokenized-finance operating model, even if they’re building on private networks. Their involvement alone drives massive demand for advanced compliance tools, robust valuation infrastructure, and institutional-grade operating systems – all crucial components for the ecosystem to thrive.
Bridging the Chasm: Institutional Demands and Public Chains
The industry is now hard at work trying to bridge the gap between closed institutional systems and open public blockchains. Various platforms are positioning themselves as intermediaries, seeking to enable seamless, compliant asset flows.
Mavryk, a Layer-1 blockchain specifically engineered for real-world asset tokenization, recently announced a partnership with Multibank Group. This collaboration aims to tokenize over $10 billion of MAG’s luxury real estate projects, including prestigious properties like The Ritz-Carlton Residences Dubai, Creekside, and Keturah Reserve. These will be promoted via MultiBank.io, emphasizing a regulated market approach.
Mavryk’s technical strategy revolves around its MRC-30 token standard. This standard is designed to embed regulatory specifications directly into the asset tokens themselves, capturing compliance policies, implementing transfer restrictions, and governing primary markets, secondary trading, and lending procedures. When an investor buys a fraction of a tokenized MAG property, they gain economic rights – capital appreciation and rental income – with ownership transparently registered on-chain.
This architecture is a testament to the industry’s evolving understanding. It aims to deliver what neither pure permissioned systems nor entirely open chains can fully offer: policy-aware networks where assets flow with embedded KYC, valuation metadata, and transfer rules, yet can still be composed across multiple markets. For issuers, this promises reduced administrative overhead and access to global investor pools. For investors, it means transparent ownership, automated distributions, and enhanced liquidity within defined regulatory boundaries.
Other players are taking different routes. Ondo Finance, for instance, focuses on tokenizing U.S. Treasuries, transforming short-term treasuries into yield-bearing tokens like OUSG (investing in BlackRock’s BUIDL fund) and the permissionless USDY. Securitize, on the other hand, acts as a comprehensive infrastructure provider for traditional asset managers entering tokenization. Its fully vertically integrated platform – encompassing an SEC-registered transfer agent, broker-dealer, alternative trading system, and fund administration – even saw BlackRock as an early investor, highlighting its critical role.
These diverse approaches, while promising, also create market uncertainty. Both models strive to alleviate fragmentation, but neither has definitively proven its ability to scale without creating new bottlenecks. It’s a complex, multi-faceted puzzle.
The $2 Trillion Question: Beyond Primary Issuance to Secondary Markets
For RWA tokenization to truly hit that forecasted $2 trillion mark, it needs far more than just primary issuance. Investors need the ability to borrow against these assets, integrate them into broader portfolio strategies, and most crucially, trade them efficiently. Without mature secondary markets, tokenization risks becoming nothing more than putting traditional assets on a blockchain without delivering any real efficiency benefits.
Today, this crucial aspect falls short. Most projects remain siloed, focusing either on digitizing an asset or managing a primary offering. They often overlook the essential infrastructure required for liquidity, robust secondary markets, lending protocols, and ongoing utility. This isn’t just a minor oversight; it undermines the core benefits that digital assets promise: portability and composability.
Indeed, fragmentation, perhaps even more than regulatory uncertainty, poses the biggest threat. If every bank develops its own non-interoperable blockchain system, we’ll end up with a highly siloed industry, trapping liquidity and negating the very advantages blockchain should offer.
What Needs to Happen in 2026
The year 2026 will be pivotal. To prove that tokenized RWAs can truly operate at scale, we need to see significant developments in secondary market depth and institutional-grade lending. Assets must evolve from mere on-chain representations to fully tradable portfolio instruments equipped with:
Deepening Liquidity and Interoperability
- Valuation-based liquidity mechanisms.
- Regulated settlement rails that seamlessly connect disparate venues.
- Unified metadata standards to enable secure inter-platform asset transfers.
- Technical and legal interoperability across different jurisdictions.
Without these fundamental pillars, tokenization remains a fancy way to put traditional assets on a ledger without unlocking meaningful efficiency gains. The current 539,000 active RWA users are early adopters; scaling to millions will demand an infrastructure that is currently only in its nascent stages.
The market has clearly moved beyond the pure experimentation phase. The next stage hinges on whether platforms prioritize substance over hype – focusing on real assets, real settlement, real yield, and, critically, real interoperability. As Alex Davis aptly puts it, “After more than a decade and a half of endless discussions and empty promises on conference panels, tokenization is finally entering the phase where it is proving itself.”
The coming year will determine whether tokenization truly evolves into a foundational financial infrastructure, capable of balancing institutional needs with on-chain efficiency and opening doors for both retail and institutional investors, or if it simply becomes another cautionary tale of crypto, limited by its own inherent constraints and the industry’s rush to scale.
