The Evolution of Tokenization: Redefining Risk and Opportunity for Advisors

In this edition, Marcin Kazmierczak from Redstone explores the evolution of tokenization, shifting from concept to allocation, and its implications for advisors. Then, Kieran Mitha addresses investor queries about tokenized investments in 'Ask an Expert'. The tokenization landscape is rapidly changing, with major companies like BlackRock, Franklin Templeton, and Fidelity Investments launching blockchain-based products. However, the real challenge lies in compliance, identity verification, and transfer rules. The Tokenization & RWA Standards Report 2026 delves into the construction of these systems. For issuers, the crucial decision is where to implement compliance rules - within the token, outside, or at the network level. Each approach has its drawbacks, affecting the asset's behavior and flexibility. Institutional capital is increasingly moving on-chain, with deposits of tokenized real-world assets in DeFi lending protocols exceeding $840 million. The allocation of these assets reflects broader market trends, with tokenized Treasury exposure declining and tokenized gold allocations expanding. Advisors must reevaluate the role of tokenized assets, which can generate additional yield and participate in strategies while remaining in the portfolio. Credit risk is becoming more explicit, with emerging DeFi risk ratings frameworks introducing continuous, on-chain risk assessment. Structural gaps remain, including corporate actions relying on off-chain processes and illiquid assets being incompatible with DeFi standards. Until these issues are resolved, tokenization will continue to scale unevenly. In 'Ask an Expert', Kieran Mitha discusses the need for tokenization to integrate into existing financial systems, regulatory clarity, and the risks surrounding tokenized assets, including the misconception that tokenization automatically creates liquidity.