Tokenization of real-world assets is the issuance of a blockchain-based digital token that represents legal ownership of an off-chain asset — a Treasury bill, money-market fund, private-credit loan or building. For institutional investors it promises faster settlement, fractional ownership, programmable collateral and around-the-clock transferability, though most tokenized value in 2026 still sits idle in cash-like instruments.
Tokenization is the process of issuing a digital token on a blockchain that represents legal ownership of an asset that exists off-chain — a Treasury bill, a money-market fund share, a slice of a private-credit portfolio, or a commercial building. For universal asset owners, the appeal is not the technology for its own sake but what it changes about how assets settle, move and serve as collateral.
After several years of pilots, 2025 and 2026 turned tokenization from a conference talking point into a live, if still narrow, part of institutional plumbing. The question for a chief investment officer is no longer whether tokenization is real, but which parts of it are useful today and which remain a bet on the future.
What does it actually mean to tokenize an asset?
A tokenized asset has two layers. The off-chain asset — the Treasury, the fund, the loan — continues to exist inside the traditional legal system, held by a custodian or trustee. The on-chain token is a digital record on a blockchain that entitles its holder to that asset. A transfer agent or issuer keeps the two in sync so that owning the token means owning the underlying claim.
The value proposition is settlement and mobility. In today's system, moving cash, posting collateral or redeeming a fund involves multiple intermediaries, cut-off times and settlement lags of one or more days. A token can, in principle, settle "atomically" — payment and delivery in the same instant — and move at any hour, with the ownership record updated automatically. That is why the first institutional products to gain traction were not exotic assets but the most boring, cash-like ones.
How big is the tokenization market in 2026?
The numbers depend heavily on what you count. Excluding stablecoins, the value of tokenized real-world assets on public blockchains climbed from roughly $5.8-6.5 billion in early 2025 to more than $26-30 billion by spring 2026, according to industry tracker rwa.xyz — growth of around 300% in a year. Include stablecoins and the on-chain total exceeds $240 billion. Broader market estimates that count private and permissioned ledgers run into the trillions, but those figures mix very different things and should be read with caution.
The composition matters more than the headline. The largest tokenized category is tokenized US Treasuries and money-market funds. BlackRock's BUIDL fund — the USD Institutional Digital Liquidity Fund, launched in March 2024 — passed roughly $2.5 billion in assets by mid-2026 and became the reference product for the category. Franklin Templeton, Ondo, Superstate and others compete in the same space.
The ownable insight: most tokenized value today is idle cash, not moving capital. The bulk of tokenized assets sit in Treasury-backed instruments used for yield and collateral, not in the illiquid private assets tokenization enthusiasts point to. The technology has proven itself for cash management first, and everything harder — real estate, private equity, infrastructure — remains early. For a universal owner, that is a feature, not a disappointment: it defines where the low-risk pilots are.
What did the GENIUS Act change?
For years the obstacle was legal, not technical. Institutions could not hold tokens whose regulatory status was ambiguous. The GENIUS Act, signed into US law on 18 July 2025, created the first comprehensive federal framework for payment stablecoins, treating compliant, fully-reserved stablecoins as regulated banking-style products rather than securities in regulatory limbo.
That clarity did two things. It gave banks, asset managers and corporates a defensible basis to hold and issue tokenized dollars, and it pulled tokenization of adjacent assets — private credit, real estate, commodities — into a more workable legal environment. BlackRock, for instance, positioned newer tokenized reserve funds to qualify as eligible backing assets under the Act, letting stablecoin issuers earn Treasury yield on their reserves. Regulatory certainty, more than any single product, is what moved the market from pilot to production.
Where does tokenization help a universal owner?
Large diversified asset owners — sovereign wealth funds, public pensions, insurers, endowments — should separate operational use cases from investment use cases.
The near-term, defensible use cases are operational. Tokenized cash and Treasuries can make collateral management and intraday liquidity faster and cheaper, letting a fund post and recall collateral around the clock instead of waiting on settlement windows. In a world where the 2022 UK gilt crisis showed how fast collateral calls can turn systemic, faster and more transparent collateral movement has real appeal.
The longer-horizon, investment use cases are more speculative. Tokenizing private markets — buyout stakes, private credit, infrastructure equity — could in theory give these illiquid assets a secondary market, fractional access and cleaner records. But that promise depends on standards, legal recognition of token ownership across jurisdictions, and genuine buyers on the other side. Today, tokenizing an illiquid asset does not make it liquid; it just puts an illiquid asset on a ledger.
What are the real risks?
Tokenization does not repeal the risks of the underlying asset, and it adds new ones. Liquidity is thinner than the marketing suggests — much tokenized value never moves. Smart-contract and custody risk introduces failure modes traditional securities do not have. Legal recognition of token-based ownership still varies across borders, so a token that is clearly property in one jurisdiction may be uncertain in another. And holders remain exposed to the issuer and its off-chain reserves — a tokenized fund is only as sound as the assets and administrator behind it.
For a fiduciary, the discipline is the same as with any new instrument: understand what you actually own, who is obligated to you, how you would exit under stress, and whether the operational benefit justifies the added complexity.
The bottom line for asset owners
Tokenization has crossed from experiment to infrastructure, but narrowly. The winning early use case is cash and Treasuries for collateral and liquidity, catalyzed by the GENIUS Act and led by products like BlackRock's BUIDL. The grander vision — liquid, fractional, always-on private markets — remains a multi-year bet that hinges on legal standards and real secondary demand. Universal owners are right to pilot the operational cases now and watch the investment cases closely, without confusing a ledger entry for liquidity.