The tokenized real-world asset market on public blockchains reached $37.29 billion excluding stablecoins as of Aug. 3, according to RWA.xyz, but the sector’s next test is moving beyond issuance volumes and proving that token holders can reliably redeem, receive, or enforce the assets represented on-chain.
Government bonds and money-market products made up $16.16 billion, or 43% of the market, according to RWA.xyz. Commodities represented $4.6 billion, while tokenized stocks and ETFs stood at $2.16 billion. Those figures show that tokenization has gained a foothold in instruments with established custodians, clear pricing and familiar settlement processes. They also place greater scrutiny on the legal and operational links between a blockchain token and the underlying asset.
A token can transfer in seconds, but a holder exercising redemption rights may still depend on custodians, banks, registrars, issuers and delivery providers operating outside the blockchain. The quality of those connections determines whether token ownership can be converted into cash, securities, bullion, or other promised assets when a holder needs to exit.
Redemption turns a token into a delivery claim
Meng, who leads Matrixdock, described settlement as the moment when an on-chain record meets the off-chain systems responsible for delivery. A blockchain can record who holds a token and when it changes hands, but it cannot by itself release gold from a vault, transfer money through a bank, or update a securities register.
Matrixdock’s tokenized gold product, XAUm, provided an example of that process in April 2025. A holder burned 32.148 XAUm tokens and received a one-kilogram London Bullion Market Association gold bar within T+3, or three business days after the trade date, following a redemption request.
The transaction involved more than a wallet transfer. The holder first had to own the required number of tokens and submit a redemption instruction. The tokens were then burned, reducing the outstanding supply, while the corresponding gold was released from custody and handed over through the physical delivery process.
Each stage serves a separate purpose. Burning prevents the redeemed tokens from continuing to circulate after the linked gold leaves the reserve. Custody arrangements establish where the metal is held and under what conditions it can be released. Delivery procedures determine whether the holder can actually take possession, rather than merely hold a digital claim.
That distinction becomes especially relevant in a market where tokenized products are often valued for continuous transferability. Secondary-market trading may be available around the clock, yet the underlying asset can remain subject to traditional cut-off times, compliance checks, vault procedures and banking schedules.
Securities add legal and registry questions
The link between token and underlying asset can be more complicated for tokenized securities than for commodities. Gold redemption is largely concerned with custody, allocation and delivery. A tokenized share or fund interest may also carry rights to dividends, voting, stock splits, tender offers and other corporate actions.
Harrison, chief product officer at AMINA Bank, pointed to three questions that determine the holder’s position: which entity owes the obligation, which law governs the instrument, and which rights attach to the token.
Those questions cannot always be answered by the smart contract code alone. Tokenization structures vary. In some cases, a token may represent a direct interest in an underlying security. In others, it may represent a contractual claim against an issuer, nominee or special-purpose vehicle that holds the underlying asset. The difference affects the holder’s legal standing if a dispute, insolvency or corporate action occurs.
Miller, chief operating officer at Securitize, noted that ownership registration also differs across structures. A blockchain address may show who controls a token, while the legally recognized owner may be recorded in a separate shareholder register or through an intermediary. Aligning those records is central to ensuring that token holders receive the rights marketed with the instrument.
This creates a practical dividing line within tokenization. Products backed by high-quality assets can still carry meaningful structural risk if the redemption process, governing documentation and official ownership records do not match the blockchain ledger.
Around-the-clock trading meets limited settlement hours
The operating hours of traditional finance pose another constraint. Blockchain transfers can occur 24 hours a day, seven days a week. Banks, custodians, primary-market agents and hedging venues generally cannot.
Meng said this mismatch can create price gaps when a tokenized asset trades while its underlying market is closed. If the underlying Treasury, equity, commodity or fund cannot be priced, hedged, minted or redeemed immediately, liquidity providers may be exposed to inventory and basis risk until conventional markets reopen.
The risk is most visible during sharp price moves outside traditional market hours. A tokenized security may continue changing hands on-chain, but market makers may lack a direct route to buy or sell the underlying instrument. Wider trading spreads or temporary deviations from net asset value can follow, particularly where redemption is limited to business days.
That does not make 24/7 transferability irrelevant. It can give holders greater flexibility in moving collateral or changing exposure. Yet continuous token trading does not automatically create continuous access to the financial infrastructure needed to settle the underlying asset at par.
Scale raises the cost of weak settlement design
The market’s composition helps explain why settlement architecture has become a central concern. Tokenized government debt and money-market products generally appeal to holders seeking yield, collateral utility and relatively predictable redemption. Those use cases depend on confidence that tokens can be converted back into the underlying exposure under disclosed terms.
BlackRock’s digital treasury fund reached $2.8 billion in total value in late August, according to the figures supplied, while Franklin Templeton held a substantial share of the $15.1 billion tokenized government-debt segment. The growth of large fund products has concentrated attention on familiar financial safeguards: asset segregation, custody arrangements, transfer restrictions, redemption windows and the legal status of holders.
Smart contracts can automate issuance, transfers and token destruction, but they do not remove dependence on off-chain institutions holding cash, securities or physical goods. If a custodian, issuer or intermediary cannot perform its obligations, the blockchain record may remain intact while the route to redemption becomes impaired.
As tokenized assets expand, market participants are likely to judge products less by whether they can be placed on a public blockchain and more by whether their redemption process works under routine conditions and market stress. The strongest structures will be those where token supply, underlying reserves, legal rights and delivery procedures remain aligned when holders choose to exercise their claims.
Curious how these RWAs fit into the bigger picture? Explore why tokenized real-world assets matter for traders today.
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