The Evolution of Tokenization: A New Era for Advisors

In this newsletter, Marcin Kazmierczak from Redstone discusses the evolution of tokenization, highlighting its transition from concept to portfolio allocation. The focus has shifted from the technology itself to how these assets fit into portfolios and what they enable. Major companies like BlackRock, Franklin Templeton, and Fidelity Investments have launched blockchain-based products, including Treasury funds and private credit strategies, attracting investor attention. The real challenge lies in compliance, identity, transfer rules, sanctions, and lifecycle management. RedStone's research team has released the Tokenization & RWA Standards Report 2026, examining how these systems are being built. For issuers, the key decision is where to place compliance rules, which can be built into the token, managed outside, or enforced at the network level. Each method has its pros and cons, affecting the asset's behavior and its ability to move across chains. Institutional capital is moving on-chain, with deposits of tokenized real-world assets in DeFi lending protocols surpassing $840 million. The transition from theory to practice is evident in how tokenized assets are used in lending markets, with investors posting tokenized assets as collateral, borrowing against them, and re-deploying the borrowed capital. Credit risk is becoming explicit, with emerging DeFi risk ratings frameworks introducing continuous, on-chain risk assessment. For advisors, the focus shifts from what the asset represents to how it behaves under stress and what risks it entails. Structural gaps remain, with corporate actions relying heavily on off-chain processes and illiquid assets not yet fully compatible with DeFi standards. However, creators of tokenization frameworks are aware of these limitations and are working to address them. In the 'Ask an Expert' section, Kieran Mitha answers investor questions about tokenized investments, highlighting the need for interoperability, regulatory clarity, and efficiency for tokenization to become a standard layer in global capital markets. Mitha also discusses the misconceptions surrounding tokenized assets, such as the assumption that tokenization automatically creates liquidity, and the challenges posed by fragmented liquidity and infrastructure gaps. Finally, Mitha explores how tokenization can open the door to new types of investments for retail investors, particularly younger generations, and how it can catalyze their participation in the market.