In this newsletter, Marcin Kazmierczak from Redstone explores the evolution of tokenization, from concept to allocation. Then, in 'Ask an Expert,' Kieran Mitha addresses investor questions about tokenized investments.
The trend of tokenization is accelerating, with companies like BlackRock, Franklin Templeton, and Fidelity Investments launching real products on the blockchain. However, the real challenge lies in compliance, identity, transfer rules, sanctions, and lifecycle management. The compliance question is an architecture question, with issuers having to decide where to place compliance rules. For advisors, this decision directly affects how an asset behaves, determining its ability to move across chains and integrate with DeFi protocols.
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 and redeploys borrowed capital. Credit risk is becoming explicit, with emerging DeFi risk ratings frameworks introducing continuous, on-chain risk assessment.
For advisors, this reframes the role of tokenized assets, from wrappers around existing products to productive collateral, capable of generating additional yield and participating in broader strategies. However, some structural gaps remain, with corporate actions relying heavily on off-chain processes and illiquid assets not yet fully compatible with DeFi standards.