The Evolution of Tokenization: From Concept to Mainstream

In this article, Marcin Kazmierczak from Redstone explores the evolution of tokenization as it moves 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 needing to decide where to place compliance rules. For advisors, this decision directly affects how an asset behaves and determines its ability to move across chains and integrate with DeFi protocols. 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 evident in how tokenized assets are used in lending markets, with investors posting tokenized assets as collateral and redeploys the 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, which are not just wrappers around existing products but can become productive collateral, 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. Until these gaps are solved, tokenization will continue to scale unevenly. In 'Ask an Expert,' Kieran Mitha discusses the need for interoperability, regulatory clarity, and efficiency for tokenization to become a standard layer in global capital markets. He also addresses the misconceptions surrounding tokenized assets, such as the assumption that tokenization automatically creates liquidity, and the challenges of fragmented liquidity and infrastructure. Finally, he explores how tokenization can open doors to new types of investments for retail investors, particularly younger generations, and how it can drive a more digital and flexible investment experience.