The Evolution of Tokenization: A New Era for Advisors

In this edition, Marcin Kazmierczak from Redstone explores the evolution of tokenization, from concept to allocation. Then, in 'Ask an Expert,' Kieran Mitha addresses investor inquiries about tokenized investments. The tokenization landscape is shifting as companies like BlackRock, Franklin Templeton, and Fidelity Investments launch blockchain-based products, including Treasury funds and private credit strategies, capturing the attention of investors. The real challenge lies not in the creation of tokens but in addressing 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 developed. For issuers, the crucial decision is where to place compliance rules - within the token, outside using tools like whitelisting, or at the network level. Each approach resolves one issue but introduces another, affecting the flexibility and control of the system. Institutional capital is moving on-chain, with 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. Credit risk is becoming more explicit, with emerging DeFi risk ratings frameworks introducing continuous, on-chain risk assessment. Advisors must consider how tokenized assets behave under stress and the risks they entail. While some structural gaps remain, such as corporate actions relying on off-chain processes and illiquid assets not being fully compatible with DeFi standards, creators of tokenization frameworks are aware of these limitations and are working towards solutions. As tokenization moves from pilot programs to live financial infrastructure, interoperability between blockchains, custodians, and traditional market infrastructure, along with regulatory clarity, is essential for it to become a standard layer in global capital markets.