The tokenized real-world asset (RWA) market will continue to grow in 2026, driven by adoption in emerging market economies, according to Jesse Knutson, head of operations at crypto exchange Bitfinex.
Knutson told Cointelegraph that emerging market countries are experiencing “friction” in capital formation and attracting foreign investment.
Tokenizing real-world assets, the process of representing physical or traditional assets on a blockchain network, solves this problem by enabling on-chain capital formation and bypassing traditional financial intermediaries, he said. Kunston added:
“Emerging markets also tend to ‘leapfrog’ the infrastructure that holds back developed markets, adopting digital rails, including stablecoin payments, faster than markets with established legacy plumbing.”
Total value of tokenized real-world assets, excluding stablecoins. sauce: RWA.XYZ
Tokenization also allows for the fragmentation of assets, democratizing access to investments that can be cost-prohibitive for the average retail investor, Knutson said.
He added that the biggest beneficiaries of asset tokenization will be companies that can provide certain returns to investors but cannot access traditional financing.
He said fixed income products such as US Treasuries and money market funds are the most popular assets for tokenization in developed countries, while tokenization of real estate and commodities is the most common use case in developing countries.
Knutson expects the market capitalization of tokenized RWA to grow to trillions of dollars over the next decade, but that growth depends on major issuers moving from pilot programs and sandboxes to actual commercial products.
Tokenized RWA market capitalization forecast from 2024 to 2030. sauce: bitfinex securities
Related: Tokenization will disrupt finance faster than digitally disrupted media: Cryptocurrency Executive
There are still some key challenges to tokenizing traditional financial assets on-chain.
Despite the positive outlook for the future of the RWA market, Knutson said several challenges remain, including the legal enforceability of on-chain contracts, ensuring sufficient liquidity for slippage-free settlement, and creating a framework for investor protection.
He told Cointelegraph that creating uniform interoperability standards between different blockchain networks and the platforms on which tokenized assets are issued is also a key challenge that must be overcome to achieve mass adoption.
Different token standards and mismatches between permissioned blockchain and permissionless crypto ecosystems create technical challenges for RWA issuers.
To realize the full potential of on-chain assets, issuers need to create tokenized products that can be transferred across diverse crypto ecosystems and used as collateral for decentralized finance (DeFi) applications.
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