The world of tokenization is rapidly evolving, with companies like BlackRock, Franklin Templeton, and Fidelity Investments launching innovative products on the blockchain. In this article, Marcin Kazmierczak from Redstone explores the evolution of tokenization, from concept to allocation, and discusses the key challenges and opportunities for advisors. The compliance question is a critical architecture question, with issuers needing to decide where to place compliance rules. This decision affects how an asset behaves, determining its ability to move across chains, integrate with DeFi protocols, and serve as collateral in lending strategies.
Institutional capital is already moving on-chain, with deposits of tokenized real-world assets in DeFi lending protocols surpassing $840 million. The transition from theory to practice is most 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. As tokenized assets move into lending and structured strategies, credit risk is evolving alongside specific DeFi strategies, such as looping.
Emerging DeFi risk ratings frameworks like Credora introduce continuous, on-chain risk assessment, bringing a level of transparency that traditional markets rarely offer. For advisors, this reframes the role of tokenized assets, from simple wrappers around existing products to productive collateral, capable of generating additional yield and participating in broader strategies while remaining in the portfolio. In an 'Ask an Expert' section, Kieran Mitha answers investor questions about tokenized investments, discussing the need for interoperability, regulatory clarity, and infrastructure development for tokenization to become a standard layer in global capital markets.