Tokenization has become a buzzword; unfortunately, it cannot prove its value. Investors remain unconvinced, and inconsistent regulations hinder progress. Too often, assets are tokenized simply for the sake of it, without providing any improvements in accessibility, efficiency, or liquidity. Tokenized portfolios on-chain sound enticing and exciting for crypto-native investors, but this is a small niche market. For tokenization to truly take off, it needs the backing of institutional and retail investors who want to modernize traditional assets, rather than just create digital twins of inefficient traditional products.
$The industry has still focused on meeting requirements and replicating real assets in the chain, but major investors still have no compelling reasons to participate. Despite institutional interest from companies like BlackRock, adoption remains sluggish as the industry has failed to address core investment issues. Tokenized assets are still difficult to trade, lack liquidity, and exist in a fragmented regulatory landscape. This complexity and uncertainty lead traditional investors with large portfolios to be indifferent to this space — some of them view Bitcoin (BTC) as a Ponzi scheme. Institutional investors have to engage in making some investment decisions regarding cryptocurrency, but this will take time. Providing proper education and tools is crucial for understanding how to navigate tokenized assets confidently.
Tokenization should focus on expanding practical functionality for investors. Boston Consulting Group in a recent paper forecasts in several scenarios that asset tokenization could reach trillions of dollars in assets under management (AUM) by 2030. Real value means greater liquidity, better valuation options, increased transparency, and trust in a system that can sensibly utilize these assets. Currently, when you hold these assets with major institutions and custodians, your options are extremely limited. In some cases, assets can be used as collateral, but the process remains convoluted and restrictive. For example, we are not talking about crypto-native investors who have invested $28.6 trillion in blockchain assets. Moreover, about pension fund managers, and I cannot imagine them using a MetaMask wallet to store tokens of real assets and using them in a smart contract to provide decentralized financial functionality.
Tokenization represents a unique opportunity to transform traditional finance. By turning static assets into smart contracts, these tokens can automate numerous financial processes and create new use cases not available in traditional finance. However, we cannot rely on the old inherited financial infrastructure: traditional custodians, fund managers, and administrators. According to the World Economic Forum, tokenization can unlock collateral mobility that has never been possible. The process remains costly and time-consuming, and neither institutional nor retail investors will participate. It is time to turn this into reality and commit to delivering real, tangible value to drive long-term adoption.
Regulatory clarity remains inconsistent and has created a fragmented market. Jurisdictions such as the Hong Kong Monetary Authority and the Abu Dhabi Global Market are taking active steps, but the fragmented global landscape makes compliance a serious challenge. For instance, if I want to tokenize an asset in ADGM and ensure compatibility with a tokenized asset under HKMA or want to trade on a decentralized exchange, I will need to comply with both ADGM rules where I am located and HKMA rules. Now imagine that there are not two jurisdictions but 150. When each has its own standards and rules, compliance is practically impossible, and the dream of a seamless financial system has gone up in smoke. Major financial institutions and service providers are already working to figure out how they can harmonize a digital asset like tokenization with the regulatory framework. We must strive for a global regulatory framework for digital assets, rather than fragmented regional legislative frameworks. Without regulatory alignment, tokenized assets risk being confined to niche markets rather than achieving true global adoption.
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