The Evolution of Tokenization: A New Era for Advisors

The world of tokenization is undergoing a significant transformation, as it shifts from a theoretical concept to a tangible reality. In recent years, major companies such as BlackRock, Franklin Templeton, and Fidelity Investments have launched real products on the blockchain, including Treasury funds and private credit strategies. This shift has not only caught the attention of investors but has also led to a significant increase in the adoption of tokenized assets. However, the true challenge lies not in the creation of tokens, but in the decisions surrounding compliance, identity, transfer rules, sanctions, and lifecycle management. The compliance question is essentially an architecture question, with issuers having to decide where to place the compliance rules. This decision can have a significant impact on the behavior of the asset, affecting its ability to move across chains, integrate with decentralized finance protocols, and serve as collateral in lending strategies. The transition from theory to practice is most evident in the use of tokenized assets in lending markets, with deposits of tokenized real-world assets in DeFi lending protocols surpassing $840 million. As tokenized assets become increasingly integrated into lending and structured strategies, credit risk is evolving alongside specific DeFi strategies. The role of tokenized assets is being redefined, as they become productive collateral, capable of generating additional yield and participating in broader strategies while remaining in the portfolio. However, some structural gaps remain, with corporate actions still relying heavily on off-chain processes, and illiquid assets such as private credit and real estate not yet fully compatible with DeFi standards. Until these pieces are solved, tokenization will continue to scale unevenly. In an interview, Kieran Mitha answers investor questions about tokenized investments, highlighting the importance of interoperability, regulatory clarity, and efficiency in making tokenization a standard layer in global capital markets.