Cryptocurrencies and blockchains have long promised to reinvent finance, but digital assets have so far been characterised by extreme volatility.
To ease that risk, developers are turning to the physical world, tokenising assets such as gold, oil and real estate to give digital tokens a real backing and lasting value.
In this article, we explore the tokenisation of real-world assets (RWA) and what it means for the blockchain industry.
What is tokenisation?
Before a real-world asset can be used to back a digital asset, it needs to be tokenised.
Tokenisation is the process of creating a digital representation, or token, of an asset on the blockchain, which allows ownership and transactions to be managed electronically and transparently.
How to tokenise an RWA?
The process of tokenising a real-world asset varies according to the protocol used, but in general it will follow a similar pattern. Let's explore how to tokenise a painting:
- Legal structuring: To allow for a compliant digital representation, ownership of the painting is transferred to a legal entity or trust.
- Asset digitisation: A smart contract is deployed on a blockchain such as Ethereum or Solana to mint tokens, each representing a fractional stake in the painting.
- Token-asset link: The tokens are legally tied to the entity holding the painting, granting holders enforceable rights over the property or its value.
- On-chain trading: The tokens can be traded on secondary blockchain markets that support asset-backed tokens, offering liquidity and global accessibility.
- Governance and settlement: If the painting is sold, proceeds are automatically distributed to token holders based on the smart contract's logic.
Use cases for real-world assets (RWAs) on blockchain
For Morgan Krupetsky, Head of Institutions and Capital Markets at Ava Labs, tokenisation is crucial to unlocking global access to traditionally restricted financial products and putting previously illiquid assets to work, allowing them to be used as collateral through decentralised finance (DeFi).
"Tokenisation allows almost anyone with an internet connection to access dollars, dollar savings accounts, US stocks and alternative assets," said Krupetsky. "It also opens up the possibility of using assets as collateral more easily and leveraging DeFi — putting historically locked-up capital or illiquid positions to work."
Here are some use cases for the tokenisation of real-world assets:
Tokenised real estate: Property is converted into blockchain tokens, and platforms such as Propy and RealT allow users to buy fractional ownership of houses and buildings.
Tokenised commodities: Commodities such as gold and oil are represented as blockchain-backed tokens, as seen with Paxos Gold (PAXG), which offers tokens backed 1:1 by physical gold.
On-chain lending with RWA collateral: Assets such as real estate or contracts are used as collateral for blockchain-based loans, with MakerDAO, Centrifuge and Goldfinch offering lending services backed by real-world assets.
Tokenisation of art and collectibles: Physical assets such as art, rare collectibles and even fine wine are being tokenised as fractional digital ownership, with companies such as Savea, Masterworks and Mattereum leading the way.
For Sam Mudie, CEO and co-founder of UK-based tokenisation firm Savea, RWAs also offer a bridge between the worlds of traditional and decentralised finance.
"Tokenisation of RWAs is revolutionary for its ability to improve accessibility and scalability, operational and cost efficiency, security, transparency and liquidity," Mudie told Decrypt. "So the opportunities are greatest where current inefficiencies are greatest."
According to Mudie, tokenisation could revitalise centuries-old industries, including wine, whisky, watches and art. These industries, he said, operate on extremely outdated infrastructure in very limited markets, still dependent on face-to-face relationships.
"Tokenising these asset classes is a significant force multiplier," he said.
Who is tokenising RWAs?
Several projects are already involved in tokenising real-world assets, with more than US$10 billion in RWAs locked on decentralised platforms as of March 2025.
Cryptocurrencies that claim to be backed by real-world assets include PAX Gold, pegged to an ounce of gold stored in a vault in London; Tether Gold, pegged to a troy ounce of gold in a vault in Switzerland; and RealT, which offers tokenised shares of US real estate.
Companies focused on real-world asset tokenisation include Avalanche, Centrifuge, RealT and Securitize.
According to CoinGecko, the combined real-world asset market had a capitalisation of approximately US$37 billion in April 2025. In March 2025, real-world assets accounted for US$10.2 billion in total value locked across 79 DeFi platforms.
Regulatory challenges and obstacles
For tokenisation to become widespread, Krupetsky said clear regulatory guidance on stablecoins is needed, especially in the US, along with clarity on allowing blockchain to serve as a legal record for tokenised assets.
Read also: First major cryptocurrency bill passed in the US
"Before that, many securities remain under dual administration, on-chain and off-chain, increasing cost and complexity," she said. "We also need to see tokenised assets integrated into traditional distribution channels, which is starting to happen."
Legal ownership: Owning a token does not always mean holding legal title; real estate and other physical assets often require traditional processes, such as notarised deeds or court proceedings.
Licensing requirements: Platforms offering tokenised assets may need brokerage or financial services licences, depending on how the tokens are issued and traded.
AML and KYC compliance: Token platforms must adhere to anti-money laundering and "know your customer" (KYC) laws, which can complicate onboarding.
Jurisdictional conflicts: Physical assets are tied to local laws, but tokens can be traded globally, creating complex legal mismatches that are difficult to navigate.
According to Centrifuge CEO Bhaji Illuminati, tokenisation tends to fall into two categories: highly liquid, stable-yield assets such as fixed-income products, and harder-to-access assets with niche appeal, such as airspace rights or sports collectibles, which hold value mainly for passionate fans who would otherwise have no way to share ownership.
"It's about recognising that there isn't a buyer for everything — and it makes no sense to tokenise assets without demand," she said. "But there are different pockets of demand for different reasons."
The challenge, Illuminati said, lies in "matching supply and demand and tokenising products that people actually care about," while rethinking how financial infrastructure is designed and operated.
"It's not about tokenising a TradFi structure for distribution, but rebuilding the operating model from scratch," Illuminati said. "That represents the biggest opportunity for crypto infrastructure to fundamentally improve how financial markets work."
The future of tokenised RWAs
As technology continues to bridge the gap between the physical and digital worlds, tokenised RWAs are poised to redefine how we invest in and interact with real-world assets in future — with some forecasting the sector could reach as much as US$50 billion in value by the end of 2025.
"Tokenisation of RWAs is one of the first major use cases for blockchain technology," said Mudie of Savea. "Rather than buying into the idea that cryptocurrencies replace the traditional financial ecosystem — the dream of many crypto diehards — they expand it. We've been investing in real-world assets for decades, even millennia. Tokenising them is just the next step in their evolution."
* Translated and edited with permission from Decrypt.