Tokenization Fails to Solve Asset Illiquidity, Experts Warn

Industry leaders at Paris Blockchain Week addressed the structural limitations of tokenized real-world assets (RWA). While the sector has seen significant growth, with the total market value rising from $8.8 billion to approximately $29.9 billion over the past year, panelists cautioned against the expectation that tokenization inherently generates liquidity.

The Liquidity Gap in Tokenized Assets

Participants emphasized that while blockchain technology improves issuance efficiency and broadens investor access, it does not solve the underlying illiquidity of assets like private credit or real estate. The growth in the sector has been primarily driven by tokenized Treasurys and commodities, which benefit from existing secondary market structures. Speakers noted that tokenization is a delivery mechanism rather than a liquidity engine for assets that lack consistent trading volume.

Market Expansion and Asset Composition

The shift toward tokenized instruments reflects a broader trend in crypto market analysis regarding the integration of traditional finance with distributed ledger technology. Despite the nearly 240% increase in market capitalization for tokenized RWAs, the focus remains on assets that are already liquid in traditional markets. The panel concluded that the industry must distinguish between the operational benefits of tokenization and the market-driven reality of asset liquidity. For further insights on how institutional capital is navigating these shifts, see our coverage on Flow Capital Migrates $150M Credit Fund to DigiFT Blockchain Platform.