What to know as the crypto industry crosses the Rubicon of tokenization

The on-chain economy is growing. 

This year, crypto-native companies and legacy finance institutions have been making substantial plays on tokenizing real-world assets (RWAs) like securities and private credit, a signal that the tokenization narrative has moved from theory to execution. 

“Appetite is growing,” Cindy Leow, the cofounder of solana-based decentralized exchange Drift Labs, told Sherwood News. “The energy is ticking toward the direction that most of these large players are looking to tokenize their products.”

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The tokenization ecosystem is becoming an increasingly packed space. After medical device firm BioSig Technologies merged with tokenization company Streamex Exchange Corporation, BioSig Technologies announced on July 7 signing definitive agreements for $1.1 billion in growth financing to jumpstart a gold-backed treasury strategy and expand its tokenization platform.

At the beginning of the month, decentralized finance protocol Ondo and venture capital firm Pantera Capital launched a $250 million investing initiative to accelerate the adoption of tokenized RWAs . 

In June, centralized exchange Kraken began deploying tokenized US equities on the solana blockchain, while Coinbase is seeking approval from the US Securities and Exchange Commission to offer its users stocks on-chain. Meanwhile, Robinhood Markets has already rolled out stock tokenization of US stocks and ETFs for its users in the European Union, issued on Arbitrum, a layer 2 blockchain.

(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company.)

Republic, an investment platform using blockchain infrastructure, started selling digital tokens that mirror the performance of shares in private companies that typically haven’t allowed individual investors a way in, such as Elon Musk’s unicorn startup Space X, artificial intelligence firm Anthropic, and software company Epic Games. 

Circle, the issuer of the second-largest stablecoin, USDC, has skyrocketed since its initial public offering. Stablecoins tokenize fiat currencies — in Circle’s case, the US dollar — and act as a building block for the on-chain economy. The ecosystem of stablecoins overall has reached an all-time high in supply at over $254 billion, a nearly 27% increase year to date, blockchain analytics firm Artemis recorded. 

Gabriel Otte, cofounder of securities-backed token issuer Dinari, said, “Once fiat is tokenized, the question is what do you do with that? The natural thing is to be able to invest in things, and you need public stocks on-chain.”

“Where we are now is at a pivotal turning point for tokenization in general,” added Michael Sonnenshein, the COO of Securitize, which is also BlackRock’s tokenization agent. “The two probably largest and most meaningful buckets of growth are really happening in and around the stablecoin ecosystem and then the tokenization ecosystem.”

Year over year, the global market for tokenization excluding stablecoins has risen roughly 60% to an all-time high of $25.48 billion with participation from Wall Street heavyweights like BlackRock and Franklin Templeton, data from real-world asset analytics platform rwa.xyz shows. 

BlackRock CEO Larry Fink said in his 2025 annual letter to investors, “Every stock, every bond, every fund — every asset — can be tokenized. If they are, it will revolutionize investing.”

The Ethereum blockchain’s total value of tokenized RWAs stands at roughly $7.7 billion, leading all other networks, including solana’s $517.7 million and XRP Ledger’s $118 million. Bitwise Chief Investment Officer Matt Hougan and Research Head Ryan Rasmussen wrote in a report published July 8 that “the cleanest way to invest in the rise of tokenization is to buy a basket of the top Layer 1 blockchains and infrastructure plays: Ethereum, Solana, XRP, Chainlink.” 

Forming clearer rules

The ongoing growth of the tokenization ecosystem comes as the US regulatory landscape is shifting with Donald Trump’s presidency, the creation of a “crypto czar” government position, and the US Securities and Exchange Commission forming a crypto task force. 

SEC Chairman Paul Atkins said in May at the Crypto Task Force Roundtable on Tokenization, “This movement of securities from off-chain to on-chain systems is akin to the transition of audio recordings from analog vinyl records to cassette tapes to digital software decades ago.”

Atkins’ position and attitude is a massive departure from that of former SEC Chairman Gary Gensler, who had gained a reputation for regulating through enforcement actions. 

Atkins argued, “Just as the shift to digital audio revolutionized the music industry, the migration to on-chain securities has the potential to remodel aspects of the securities market by enabling entirely new methods of issuing, trading, owning, and using securities.” The chairman, who was confirmed by the Senate in April, said his key priority is to develop a “rational regulatory framework” to establish unambiguous guidance for the issuance and custody of crypto assets.

Currently, two legislative bills aim to do that: the GENIUS Act, which focuses on stablecoins and passed the Senate in June, and the CLARITY Act, which centers on market structure and was introduced in the House in May. 

Issuers putting real-world assets on blockchains are seeing the Trump administration support crypto policy, encouraging them to participate in the tokenization trend, Tony Lau, an investor at Primitive Ventures, told Sherwood. With clearer rules and an unhostile administration, asset issuers become less concerned about the legal complications and can increase their focus on finding solutions to put assets on-chain, he added.

Facing risks and limitations

The promise of tokenization still has risks and structural challenges, despite its increasing adoption. 

One of the biggest limitations is the minting process itself. Drift Labs’ Leow said, “There is no perfect tokenization platform at the moment. A lot of these platforms will take days if not weeks to onboard new assets in the platform.” 

Dinari’s Otte emphasized how problems can emerge when putting RWAs on a blockchain, because the process is not homogenous. 

At a simple level, tokenization entails an issuer minting an digital asset on a blockchain and proving the underlying asset is secured, while the holder trusts that the issuer of the token has some guarantee of value. 

However, the process varies by asset class. “There are all sorts of different ways of going about doing it and varying degrees of compliance that come with that,” Otte told Sherwood. 

Stablecoins involve an issuer taking $1, often in the form of US Treasurys, holding it in a bank account, and issuing a token that represents that dollar. In contrast, tokenizing public stocks can be the hardest because of the convoluted back end and the compliance needed in the US, Otte said. In this case, he explained, a user might bring $1 or a stablecoin in, and an exchange like Dinari then buys an Apple share on the back end with clearing houses. Once that Apple share has been sequestered into a Dinari account, it mints a corresponding Apple token.

From a regulations standpoint, owners of stock are tracked, brokers have specific reporting rules to follow, and shares need to be secured, highlighting how complicated public stocks are. 

Tokenized stocks aren’t different from securities. SEC Commissioner Hester Peirce said in a statement, “Tokenized securities are still securities. Accordingly, market participants must consider — and adhere to — the federal securities laws when transacting in these instruments.”

Selling tokens to international markets

A crypto-friendly administration in the US and the advancement of blockchain legislation in Congress have not eliminated all worry associated with regulatory risk. 

Primitive Ventures’ Lau said, “Founders that we chatted with are concerned about regulatory risk… because if they put US equities on-chain, whether through spot or on perpetuals, they’re effectively selling it to global users.” 

Complications arise when tokenizing private credit as well, according to Dmitriy Berenzon, a partner at early-stage venture firm Archetype, which is an investor of rwa.xyz. 

“In the private credit component, one of the things that I think is the hardest to solve is recourse, because you are trying to reconcile a global borrower base with local jurisdictions,” Berenzon said to Sherwood. “If you’re lending to someone in a certain country and they default, who manages the recourse to actually get those assets or some form of assets back?”

Robinhood, which started allowing retail investors based in the European Union to trade tokens representing shares of OpenAI, a private company, is already seeing that play out. OpenAI CEO Sam Altman urged traders to “be careful,” saying OpenAI tokens are not OpenAI equity. “We did not partner with Robinhood, were not involved in this, and do not endorse it,” Altman wrote in a social media post on July 2. 

While OpenAI has an estimated $300 valuation and many investors are eager for any way into the company, Berenzon also highlighted the possibility of a “lemons market” dilemma where “things that are going on-chain are actually the lowest-quality opportunities that cannot find capital elsewhere.” For issuers looking to use crypto rails to finance assets in the real world, he stressed the importance of ensuring they’re financing a high-quality asset.

Just as oracles present a bottleneck in DeFi, the quality of tokenized assets creates similar risks. When a blockchain opens global rails to finance anything, that capability raises a question: are we financing the right things?