What is tokenization? Real-world assets on-chain, explained

Tokenization is the process of representing a conventional asset as a token on a blockchain so that it can be held, transferred and settled with the same infrastructure crypto uses. The word covers a lot of ground, from a $2 billion Treasury fund to a fractionalized apartment building, and the quality of the products varies just as widely. The useful way to think about it is not “putting assets on a blockchain” but “issuing a new form of the asset whose record of ownership lives on a shared ledger instead of in a transfer agent’s database.”

How a tokenized fund is built

Take the model that has worked. An asset manager sets up a fund that holds short-dated US Treasuries and cash. A transfer agent, in most of the large cases Securitize, keeps the official shareholder register, but that register is written to a blockchain rather than a private database. Investors who pass the fund’s onboarding, which includes identity checks and accreditation where required, receive tokens in a whitelisted wallet. The tokens can only move between wallets the transfer agent has approved, so the fund never loses control of who its investors are. Yield accrues daily and is paid either by minting new tokens or by adjusting the token’s value, depending on the design. Redemption returns dollars or, increasingly, a stablecoin, often within the same day.

BlackRock’s USD Institutional Digital Liquidity Fund, known by its ticker BUIDL, launched on Ethereum in March 2024 and expanded to several other chains; it became the largest tokenized fund within months and is used as collateral on crypto exchanges and as a reserve asset for other on-chain products. Franklin Templeton’s OnChain US Government Money Fund had been running since 2021 and was the first US-registered fund to record share ownership on a public chain. Ondo, Superstate and a handful of others built similar products. Together the tokenized Treasury category grew from under $1 billion at the start of 2024 to several billion dollars by 2025, still small against the $6 trillion money market industry but large enough that the incumbents took it seriously.

What is really different

The asset inside is identical. What changes is the plumbing around it. Traditional fund shares settle on T+1 or T+2 during business hours through a chain of intermediaries. A tokenized share settles in seconds, at 3 a.m. on a Sunday if needed, directly between two wallets. A trader holding a tokenized Treasury fund can post it as margin on a venue that also accepts stablecoins, earn the Treasury yield while it sits there, and sell it for a stablecoin the moment they need cash, all without leaving the chain. That is why the first real demand came from crypto-native firms who were previously forced to hold non-yielding stablecoins as their working capital, and why the GENIUS Act’s ban on stablecoin issuers paying yield pushed even more of that capital toward tokenized funds.

Programmability is the second difference. Because the token is software, the issuer can encode transfer restrictions, automate dividend or coupon payments and integrate directly with lending protocols. The flip side is that the token can also be frozen or clawed back by the issuer, which is a compliance feature to a regulator and a consideration for a holder.

Where the legal risk sits

A token is a claim, and the strength of the claim depends on the structure behind it. The questions to ask are the same ones a fund lawyer asks about any wrapper. Does the token represent direct ownership of the fund share, or a derivative claim on an intermediary that owns the share? If the issuer fails, is the asset bankruptcy-remote? Which law governs, and has any court actually enforced a tokenized claim under it? For the large regulated funds the answers are clear because the token simply is the share, recorded by a registered transfer agent. For products that tokenize a claim on a special purpose vehicle that holds a claim on an asset, the chain of ownership is longer and each link deserves scrutiny.

Regulation follows the asset rather than the technology. A tokenized security is still a security; the SEC has said so repeatedly, and its 2025 shift toward accommodating tokenized issuance came through exemptive relief and staff guidance rather than a change in that principle. Europe’s DLT Pilot Regime and the UK’s Digital Securities Sandbox created controlled environments for trading tokenized securities on regulated venues, and that is where most exchange-level experimentation has happened.

Beyond Treasuries

Private credit is the second category with real volume. Platforms such as Figure, Maple and Centrifuge tokenize loan pools so that lenders can fund and trade them on-chain, and Figure’s home equity lines became one of the largest tokenized asset books by origination. Tokenized stocks returned in 2025 through products from Robinhood, Kraken (via xStocks) and others, mostly for non-US investors, with the SEC signalling openness to a US framework. Real estate, art and commodities have been tokenized for years with little liquidity to show for it, which points to the general rule: tokenization adds value where the asset is already standardized and liquid and the constraint was settlement, not where the asset was illiquid to begin with.

What to watch

The things that will decide whether tokenization becomes market infrastructure rather than a product category are dull and important: whether the major custodians and fund administrators support tokenized share classes natively, whether the Depository Trust Company’s own tokenization work connects to public chains, how quickly the SEC’s rulemaking on tokenized securities and its innovation exemption land, and whether stablecoin settlement becomes the default cash leg for regulated funds. Every one of those is a question of plumbing, which is a good sign. The technology stopped being the hard part some time ago.