Why should I bother with RWAs?

Intermediate

2025-06-30

What if you could buy and sell a fraction of a Manhattan skyscraper, a stake in a gold mine, or a piece of a blockbuster film’s royalties as easily as you trade a stock?

The conversation around blockchain has matured far beyond cryptocurrencies alone. One of the most impactful narratives gaining traction this year is the tokenization of Real-World Assets (RWAs). This involves representing tangible assets, from real estate and commodities to fine art and intellectual property, as digital tokens on a blockchain.

Experts are bullish on this sector, with some projections indicating the RWA market could swell to $10 trillion to $16 trillion by 2030, a significant leap from its current valuation of around $15 billion - $20 billion (excluding stablecoins).

The market for tokenized U.S. Treasuries alone has surged by over 600% in the past year, growing from approximately $100 million to over $1.3 billion as of early 2025.

What's more, early 2024 also saw BlackRock, the world's largest asset manager, launch its BUIDL fund on the Ethereum network. The fund attracted over $375 million in assets within its first month and has since grown to over $2.8 billion.

How do we start exploring this very complex field? For intermediate traders looking to diversify, RWA tokenization can present compelling opportunities.

At Toobit Academy, we believe in looking at both sides of the coin. That means breaking down not just the potential rewards of RWA tokenization, but also the real risks, so you can make informed decisions that fit your strategy.

The allure of RWA tokenization

RWA tokenization is poised to revolutionize how we interact with traditional assets, offering several attractive benefits for savvy traders:

Fractional ownership

Traditionally, investing in assets like prime real estate or a masterpiece painting required significant capital, often limiting participation to institutions or ultra-high-net-worth individuals.

RWA tokenization changes this by dividing these assets into smaller, affordable digital units.

This fractional ownership democratizes access, allowing traders to participate in markets previously out of reach, diversify their portfolios with smaller allocations, and potentially gain exposure to appreciating assets.

Enhanced liquidity

Many real-world assets, such as properties or private equity, are inherently illiquid, meaning they are difficult and time-consuming to buy or sell quickly.

By tokenizing them on a blockchain, these assets can be traded 24/7 on global digital marketplaces, dramatically improving their liquidity.

This translates to faster settlement times and greater flexibility for traders to enter or exit positions.

Increased transparency and auditability.

Blockchain's immutable and transparent ledger provides a verifiable record of ownership and transactions for tokenized RWAs. This inherent transparency can reduce fraud, streamline due diligence processes, and build greater trust among market participants.

For traders, this means more reliable access to information about the asset's history and provenance.

Global accessibility and reduced barriers.

Blockchain transcends geographical boundaries and traditional financial system limitations. Tokenized RWAs can be accessed and traded by anyone with an internet connection, bypassing cumbersome international transfer processes, hefty fees, and restrictive intermediaries.

This global reach opens up a vast new pool of potential investors and market participants.

Integration with DeFi

The integration of tokenized RWAs into Decentralized Finance (DeFi) protocols unlocks novel financial instruments. For instance, tokenized U.S. Treasuries alone surged by 179% in 2024, reaching over $7 billion in market capitalization as of June 2025, offering attractive yields.

Traders can potentially use tokenized real estate as collateral for loans, participate in lending pools backed by real-world debt, or even earn yield on tokenized commodities.

This blends the stability often associated with RWAs with the innovative yield-generating mechanisms of DeFi.

Cost efficiency and streamlined processes

By automating many processes through smart contracts and eliminating numerous intermediaries (like brokers, lawyers, and notaries), RWA tokenization can significantly reduce transaction costs and administrative overhead.

This efficiency can lead to better returns for investors and a more streamlined trading experience.

McKinsey estimates that tokenization could reduce operational costs and unlock over $100 billion in capital annually for financial institutions through improved collateral management alone.

Understanding RWA tokenization risks

While the opportunities are compelling, traders must approach RWA investments with a clear understanding of the associated risks:

Regulatory uncertainty and legal ambiguity

This is arguably the most significant hurdle. The regulatory landscape for RWA tokenization is nascent and varies widely across jurisdictions. A lack of clear legal frameworks can create uncertainties regarding ownership rights, taxation, and investor protection.

Regulatory bodies worldwide are taking vastly different approaches. For instance, while the European Union has implemented its comprehensive Markets in Crypto-Assets (MiCA) framework to create clear rules, the U.S. continues to operate with a patchwork of guidance from the SEC and CFTC, leading to high-profile legal battles in 2024 over whether certain tokens are securities.

Since a project deemed compliant in one jurisdiction could be in violation in another, regulatory changes could adversely impact the value or tradability of tokenized assets, and legal disputes over ownership could be complex and costly to resolve without established precedents.

On-chain vs. off-chain

A token on a blockchain merely represents ownership; the actual asset still exists in the physical world.

The crucial link between the digital token and the real-world legal ownership (e.g., deeds, titles, physical custody) is paramount.

If this "legal nexus" is weak, poorly defined, or relies on a centralized entity that fails, the token might lose its backing, leaving token holders with a worthless digital representation. Due diligence on the legal structure behind each RWA project is critical.

Valuation challenges and market illiquidity

While tokenization aims to enhance liquidity, not all tokenized RWAs will automatically command deep trading markets.

Niche assets or smaller projects might still suffer from low trading volumes, making it difficult to buy or sell tokens at a fair price when desired.

For example, many tokenized real estate or art projects on secondary markets have 24-hour trading volumes of less than $10,000, according to on-chain market data. This thin liquidity means traders may have to accept a significant discount (slippage) to sell their positions quickly, or they may be unable to find a buyer at all.

Furthermore, accurately valuing unique or less common RWAs can be challenging, as their market price can be influenced by both the underlying physical asset's market and the broader crypto market sentiment.

Oracle dependence and data integrity

Many RWA tokenization projects rely on "oracles" – third-party services that feed real-world data (e.g., asset valuations, rental income, commodity prices) onto the blockchain.

In May 2025, a price feed from the oracle network Chainlink was momentarily manipulated for a low-liquidity asset. This triggered over $500,000 in unfair liquidations on a lending protocol in a matter of minutes.

If these oracles are compromised, provide inaccurate data, or cease to function, the tokenized asset's value and functionality could be severely impacted. The security and reliability of the oracle network are paramount.

Smart contract vulnerabilities

RWA tokens are governed by smart contracts. Like any code, smart contracts can contain bugs, vulnerabilities, or exploits. A successful attack on a smart contract could lead to the loss of funds, unauthorized transfers, or the freezing of assets, directly impacting the tokenized RWA.

While a full audit is non-negotiable, it doesn't eliminate risk entirely. According to security firm Immunefi, over $1.8 billion was lost to hacks and fraud across the Web3 space in 2023 alone.

Thorough security audits are essential, but they don't guarantee complete immunity from risks.

Custody and operational risks

While some projects aim for greater decentralization, many RWA tokenization models still involve centralized custodians or administrative entities responsible for the physical asset.

This introduces counterparty risk – if the custodian defaults, becomes insolvent, or acts maliciously, investors could face losses or difficulty accessing their underlying assets.

The crypto industry has seen this play out with devastating consequences, such as the collapse of centralized lending platforms like Celsius and BlockFi.

Operational failures or mismanagement by these centralized entities also pose a risk.

Technological interoperability and fragmentation

The RWA ecosystem is evolving across various blockchains and platforms.

Lack of seamless interoperability between different chains and traditional financial systems can lead to fragmented liquidity and hinder the efficient transfer and trading of tokenized assets across different environments.

The informed approach

Investing in RWAs on the blockchain is a frontier market offering substantial opportunities for diversification and growth. However, it demands a disciplined and research-intensive approach. traders should:

Prioritize due diligence (DYOR): Thoroughly investigate the underlying asset, the legal structure, the technology, the team behind the project, and the chosen oracle solution.
Understand the legal framework: Seek to comprehend how legal ownership of the physical asset is linked to the digital token in the specific jurisdiction.
Assess liquidity: Evaluate the potential for liquid markets for the specific RWA token you are considering.
Start small: Allocate only a portion of your portfolio that you are comfortable with, especially as the market matures and regulatory clarity increases.
Stay continuously informed: The RWA space is dynamic. Keep abreast of regulatory developments, technological advancements, and market trends to adapt your strategies accordingly.

By carefully weighing the immense potential against the complex risks, market participants can strategically position themselves to capitalize on the transformative power of Real-World Assets on the blockchain.