RWA Tokenization: A Growing Trend with Hidden Risks

Real-world asset tokenization is one of the most talked-about narratives in crypto right now. Banks are publishing white papers, analysts are throwing around numbers in the trillions, and new protocols are launching every month promising to put houses, bonds, and stock portfolios on a blockchain.

But few explainers delve into the details of what an RWA token actually is, who controls it, and what happens when something goes wrong. The legal wrapper matters enormously, as owning the token does not automatically mean owning the asset.

The process typically involves three steps: first, an issuer takes an asset and places it in a special-purpose vehicle (SPV) or regulated fund; second, the issuer mints tokens on a blockchain that correspond to shares or fractional ownership of that vehicle; third, token holders receive economic rights such as yield or price appreciation.

Not all RWA tokenization is the same. The sector currently breaks down into four broad categories: tokenized government securities, tokenized private credit, tokenized real estate, and tokenized commodities and equities.