Written by James Bourne

2025 is on track to become a pivotal year for tokenization – as greater adoption amongst financial institutions is predicted to take hold. 

Ripple noted in January that its leaders were ‘confident’ that tokenization ‘will continue to revolutionise institutional finance and enable new asset classes.’  Writing for CoinDesk meanwhile, Jason Barraza, COO at Security Token Market, said 2025 ‘should be the year tokenization solidifies its position and transitions into the ‘pragmatists’ portion of the adoption bell curve.’ 

The numbers back this up, with every analyst predicting the real-world asset tokenization (RWA) sector will have a market size in the trillions by 2030. Even the gloomiest prediction from McKinsey – who admits it is less optimistic than previously – has $4tn as its bullish forecast. A median across firms, according to Tren Finance, is at about $10tn.  

So what is driving this – and what can we expect going forward? Part of it is down to moves made in 2024. According to RWA.xyz’s State of Tokenization Report, 2024 saw the total market cap of tokenized assets increasing by 32%, with the tokenized RWA market, excluding stablecoins, up 85% year over year. “Evolving regulatory approaches in… the United States, the Middle East, and Hong Kong have led to greater experimentation among legacy financial institutions, sparking a level of institutional interest previously unseen in the industry,” the company noted. 

One significant milestone involved the world’s largest asset management company. In March, BlackRock introduced its first tokenized product issued on a public blockchain, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL). CEO Larry Fink told Bloomberg that the company believed the ‘next step going forward will be the tokenization of financial assets… mean[ing[ every stock, every bond… will be on one general ledger.’ In November, BlackRock expanded beyond Ethereum to include five new chains: Aptos, Arbitrum, Avalanche, Optimism’s OP Mainnet, and Polygon. 

End users are also beginning to appreciate the potential of RWAs. According to CoinGecko figures analysing the most profitable crypto narratives at the end of 2024, RWA ranked third. This was well behind AI and memecoins, but still a strong performance at 819.5% average returns year to date. Barraza argues that 2025 will ‘see the chasm between crypto-native communities and traditional finance start to narrow.’ Adoption of tokenization by large banks and asset managers will ‘yield tangible results’, he added. 

Alongside institutional investment, greater interoperability, partnerships, and technological integration are on the roadmap for 2025.  

The Middle East is an area of significant potential, thanks in part to a proactive regulatory environment and opportunities for real estate. Tokinvest, based in Dubai, is a good example. The company is developing tokenised RWA solutions aimed at reflecting fractional rights in real estate assets, as well as satisfying regulatory criteria. In a report published in February, the company cited figures from the Dubai Land Department (DLD) which forecast the real estate tokenisation market there to reach $16.3bn by 2033, representing 7% of Dubai’s total real estate transactions.   

Another example is Ondo Finance. The company launched the latest iteration of Ondo Global Markets, an RWA tokenization platform, in February. The goal is to enable on-chain access to stocks, bonds, and exchange-traded funds (ETFs). “What stablecoins did for dollars, Ondo Global Markets will do for securities,” the company claims. 

It would be remiss not to mention Securitize, arguably the best-known tokenization platform provider and cited as the largest platform in the world by assets. In January, the company announced that Wormhole, a cross-chain protocol, had gone live as a primary interoperability solution. The company cited the need for greater accessibility and growth of tokenized assets for institutional investors being ‘paramount’ in bringing about the mass adoption of digital assets. 

With regard to technological integration, artificial intelligence has various possibilities. For a real estate example, AI-enhanced tokenization could enable real-time property valuation and automated rental income distribution through smart contracts.  

Asset Chain notes how AI can transform asset tokenization at both the backend and frontend. For the former, AI can leverage the data generated by each tokenized asset to refine processes and improve asset valuation algorithms among others. At the front end, AI could offer visual recognition, hyper-personalised portfolio recommendations for investors, as well as interacting with AI agents to answer questions, and even make transactions. 

If stronger institutional adoption is to occur, security and regulation are inevitably key sticking points which need to be addressed. Barraza notes that in the US, appointees are in place which could increase the likelihood of a clear US legal framework for digital assets.  

Elliptic, a crypto compliance solutions provider, argues in a blog post from VP policy and regulatory affairs David Carlisle that it is to APAC (Asia Pacific) the industry should look. The Hong Kong Monetary Authority (HKMA) launched a regulatory sandbox in August which involves testing ‘interbank settlement using experimental tokenised money’, while the Monetary Authority of Singapore (MAS) announced its own plans for commercialising asset tokenisation in November. 

“We think that 2025 will see a proliferation in the number of regulatory sandboxes and other similar initiatives designed to support the responsible development of tokenization use cases among financial institutions,” wrote Carlisle, adding that while APAC will continue to lead the way, other regulators will begin taking ‘significant’ steps. 

From the security side, zero-knowledge proofs (ZKPs) – a cryptographic method where knowledge can be proven about data without the data being revealed – can increasingly be seen as a way to achieve privacy on public blockchains. David Schwartz, Ripple CTO, argues that the era of institutional adoption will be made possible with ZKPs, adding the proofs will ‘unlock the full potential of DeFi’, ensuring institutions ‘meet regulatory compliance while maintaining confidentiality.’ 

An example of ZKPs being utilised is in the recent announcement by Taurus of an open source confidential token standard for debt and equity tokenization. The launch is alongside the Aztec Foundation – and therefore built on Aztec’s upcoming layer 2 protocol powered by ZKPs – and is written in Noir, an open-source language for building zero-knowledge applications. The company said the launch is a ‘significant step forward in enabling financial institutions to issue tokenized versions of financial instruments on public blockchains while maintaining strong privacy expectations of their customers.’ 

Ultimately however, there is still plenty of iteration to occur yet. The OECD (Organisation for Economic Cooperation and Development) published a new policy paper in January on the tokenisation of assets in financial markets and notes regulatory uncertainty, infrastructure development and legal gaps as primary obstacles. Yet there is one other concern they note. How will existing frameworks cope amid such an opportunity to change market practices? 

“The transformation of capital markets requires the coordination and interoperability of numerous moving pieces in asset and trade lifecycles that must be digitised,” the OECD paper notes. “The near real-time settlement made possible by on-chain tokenized assets brings many potential benefits to market participants, but it could have a major impact on current trading practices as well in the future"