1.3 Why Real-World Assets Matter Now
Why 2024-2026 is a structurally different moment for tokenization than the 2017-2019 security token wave, and why four converging forces have replaced the regulatory, capital, and infrastructure gaps that killed the previous attempt.
The question the reader should be asking at this point in the paper is not whether real-world assets will move on-chain. The first two sections have already shown that they are doing so. The question is why the current wave should be trusted when the last one quietly ran aground.
Between 2017 and 2019, every serious tokenization effort collided with the same wall. Rules were unclear, institutional buyers sat on the sidelines at size, and the infrastructure was too thin to carry real volume. The pitch decks described a financial system being rebuilt on rails that could settle in seconds and move any asset anywhere. The reality was a handful of pilots, a few listed security tokens trading with no liquidity, and a lot of conferences. That wall has come down, and not because the industry wished it away. It came down because four separate forces converged at almost the same time.
Each of these forces on its own would be a meaningful story. Any single one of them, in 2019, might have pushed one corner of the market forward by a few years. Arriving together is what changes the picture. Regulation in the jurisdictions that matter has moved from debate to operational frameworks. A high-rate environment has turned hundreds of billions of stablecoin balances into a standing bid for on-chain yield. Shorter settlement cycles have made the hidden cost of legacy post-trade infrastructure impossible to ignore. And the technical and institutional stack has matured past the point where it can carry institutional flows. The purpose of this section is to hold those four drivers together in one view, so the reader can read the rest of the paper with a clear sense of why the timing is real rather than hopeful.
What Went Wrong Between 2017 and 2019
The security token offering cycle of 2017 to 2019 was not a failure of ambition. The architects of that moment described, often accurately, the same future the current wave is building toward: programmable securities, faster settlement, fractional ownership of private markets, global distribution of regulated instruments. What they did not have was any of the machinery needed to make those claims operational at scale.
The first gap was legal. In most major jurisdictions it was unclear how tokenized securities would be treated, who could act as a transfer agent for them, and what standard the underlying instrument had to meet. Issuers making a genuine effort to comply had to reconstruct the answer for each deal, often through bespoke legal opinions that were not reusable. That made every issuance expensive, slow, and unrepeatable.
The second gap was demand. The buyers who could have absorbed tokenized securities at size, large asset managers, insurance companies, pensions, bank treasuries, had no mandate, no risk framework, and often no permission to hold these instruments. Retail demand was there, but retail cannot underwrite a private credit fund or hold a tokenized Treasury bill at the scale needed to justify the structuring work.
The third gap was infrastructure. Public chains could not handle the throughput or reliability that regulated flows require. Custody was crypto-native, which meant it was not acceptable to the institutions that actually hold the money.
Oracle networks were young and brittle, issuance platforms were in their first generation, and DeFi could not safely absorb any asset that carried a regulatory obligation, because the protocols made no distinction between users who had been onboarded and users who had not.
The fourth gap was liquidity. Without institutional buyers, the venues that listed security tokens had shallow order books. Without deep order books, the token did not offer the easier exit story the tokenization pitch depended on, so issuers could not justify the cost of going through the effort in the first place.
Each of those gaps is now being closed by one of the drivers that follows. That is the single analytical move worth carrying through the rest of this paper. The current wave is not a re-run of the last one because each of the things that killed the last one has been replaced by something operational.
| Gap, 2017-2019 | What closed it, 2024-2026 |
|---|---|
| Legal ambiguity about tokenized securities | Operational frameworks in the EU, UK, Switzerland, US, Singapore, and Hong Kong |
| No institutional buyers at size | Multi-hundred-billion stablecoin pool plus T+1 and collateral pressure pulling banks and asset managers in |
| Thin issuance and custody infrastructure | Bank-grade custody, transfer agents, tokenized deposits, permissioned DeFi rails |
| Shallow secondary liquidity | Live products with multi-billion AUM and incumbent venues (DTC, JPMorgan, BlackRock, Franklin Templeton, Apollo, Citi) deploying real capital |
Driver One: Regulation Has Moved from Debate to Operation
The regulatory picture in the jurisdictions that matter has stopped being a question and started being a checklist. Chapter 6 covers it in full. For the purpose of the "why now" question, the point is narrower: between March 2023 and early 2026, the jurisdictions that issue the world's reserve assets and host its largest asset managers have put operational frameworks in place. Issuers, banks, and custodians can now point to specific licenses, articles, and sandbox conditions instead of guessing at interpretations.
The European Union moved first on infrastructure. The DLT Pilot Regime went live on 23 March 2023, creating three DLT-based license categories for trading venues and settlement systems and giving regulated market participants a legal path to operate tokenized markets within a defined sandbox 1. The Markets in Crypto-Assets Regulation (MiCA) became applicable on 30 December 2024, with transitional relief for existing crypto-asset service providers running to 1 July 2026 2. Switzerland, under its DLT Act, licensed SIX Digital Exchange in September 2021 and BX Digital in March 2025 as DLT trading venues, giving institutional issuers a Swiss home for regulated tokenized securities 3. The UK launched the joint Bank of England and FCA Digital Securities Sandbox on 30 September 2024, creating a five-year window for sandboxed issuance, trading, and settlement of digital securities under tailored rules 4.
The United States covered the two categories that had been missing. On 18 July 2025, the GENIUS Act became the first US federal framework for payment stablecoins, setting reserve, disclosure, and redemption standards, and barring issuers from paying interest to holders natively 5. That last provision matters later in this section. On 28 January 2026, SEC staff issued joint guidance on tokenized securities, confirming that tokenization does not change the legal treatment of the underlying security and dividing the market into issuer-sponsored and third-party-sponsored models 6.
Asia mirrored the move. The Monetary Authority of Singapore operationalized Project Guardian with more than 40 industry participants, Singapore launched Global Layer 1 and BLOOM, MAS published an operational guide for tokenized funds, and in November 2025 ran a live CBDC-settled trial of a tokenized MAS bill 7. Hong Kong's fiat-backed stablecoin licensing regime took effect on 1 August 2025, with the HKMA expected to issue the first licenses in early 2026 and Project Ensemble running interbank tokenized-deposit and wholesale-CBDC trials 8.
The list itself is the point. A firm that wants to issue, hold, or trade a tokenized instrument today can choose among multiple rulebooks written for that purpose, not stretched to cover it.
Driver Two: Stablecoins Have Become a Standing Bid for On-Chain Yield
The second driver is the most recent and the most underappreciated. Between the high-rate environment that began in 2022 and the operational clarity that arrived in 2025, the stablecoin market grew into something different from what it was designed to be. It is no longer a payments rail with a side role in crypto trading. It is a multi-hundred-billion-dollar pool of idle balances that have every reason to reach for yield and very few places to safely find it.
The Federal Reserve reported that stablecoin market capitalization grew by more than 50% during 2025, reaching roughly $317 billion by April 2026 9. Stablecoin issuers collectively held approximately $200 billion in US Treasuries as of 31 March 2025, ranking them, on that snapshot, alongside the largest sovereign holders of US government debt 10.
The US Treasury's Q1 2026 TBAC presentation confirmed the link directly: stablecoin growth has pulled Treasury and Treasury repo holdings up at roughly a 35% compound annual growth rate, with the GENIUS Act identified as a further driver 11. The Kansas City Fed's separate analysis treats the mechanical link between stablecoin growth and Treasury demand as credible enough to model explicitly 12.
Two things follow from that balance sheet. The first is the simple arithmetic. With short-end Treasury yields around 4%, holders of non-yield-bearing stablecoins are collectively foregoing roughly $8 billion a year in interest by default, as illustrated in industry analysis of the opportunity cost 13. That is not a small drag on the system. The second is regulatory. The GENIUS Act's prohibition on stablecoins paying interest natively means the yield layer cannot live inside the stablecoin itself. It has to live in a separate instrument that the stablecoin holder can move into and out of on-chain.
Tokenized Treasuries and tokenized money market funds are what that instrument looks like. Tokenized Treasury value on public chains rose from roughly $5 billion in early 2025 to more than $10 billion by early 2026, and tokenized money market funds collectively held around $7.4 billion in AUM by the end of 2025, with BlackRock's BUIDL at approximately $2.4 billion by April 2026 and Franklin Templeton's BENJI at around $894 million in a February 2026 snapshot 14.
The effect is structural rather than promotional. A stablecoin issuer that wants to stay compliant under the GENIUS Act cannot pay yield. A stablecoin holder sitting on idle balances has a clear preference for earning the Treasury rate rather than giving it up. Tokenized RWAs are the only on-chain instrument that can legally absorb that demand at size.
The second-order effect is already visible: a new generation of stablecoins, such as Ethena's USDtb, holds tokenized Treasury products like BUIDL as reserve assets, so the on-chain cash leg and the on-chain yield leg become explicitly linked rather than separate markets 15. BIS Bulletin 115 classifies tokenized money market funds as a fast-growing on-chain collateral and savings instrument, with Ethereum hosting roughly half of the segment's total value locked 16.
Driver Three: T+1 Has Made Legacy Post-Trade Infrastructure Expensive to Keep
The third driver is the one most easily missed by readers coming to tokenization from a crypto background, because it originates in the machinery of traditional post-trade rather than in blockchains. On 28 May 2024, the United States moved equities and most corporate bonds to T+1 settlement 17. The European Union, United Kingdom, and Switzerland have coordinated a joint transition to T+1 on 11 October 2027, with ESMA's June 2025 high-level roadmap setting out the operational path for the EU 18.
Each compression of the settlement cycle surfaces the same problem. Securities and cash move across siloed systems that cannot settle atomically. That means funding has to be posted earlier, failed trades become harder to cure inside the new window, and intraday liquidity pressure rises.
Tokenized infrastructure addresses this at its root, because tokenized securities and tokenized cash sitting on the same ledger can settle in a single atomic transaction rather than as two separate legs. That is not an abstract engineering claim. It is the reason the incumbent post-trade institutions are now running tokenization programs themselves.
JPMorgan's Kinexys platform, the successor to its Onyx business, has cumulatively processed more than $3 trillion and averaged above $7 billion per day in late 2025, and continues to extend the product line: JPMD, a USD-denominated deposit token, launched on Base on 12 November 2025 after a proof-of-concept earlier in the year with B2C2, Coinbase, and Mastercard 19.
In October 2025, JPMorgan completed a live tokenized private-equity fund transaction on Kinexys with JPM Asset Management, the Private Bank, and Citco as fund administrator 20. In December 2025, JPMorgan Asset Management launched a tokenized money market product on public Ethereum via Kinexys 21. Citi, PwC, and the Solana Foundation completed a trade-finance tokenization proof-of-concept on Solana in February-March 2026, tokenizing a bill of exchange through its full lifecycle 22.
The most telling signal came on 11 December 2025, when the SEC granted DTC no-action relief to run a three-year tokenization pilot covering Russell 1000 equities, US Treasuries, and major-index ETFs, with launch expected in the second half of 2026 23. DTC is the central settlement institution of the US equity market. When a central depository takes a formal pilot on the replacement of its own rails, the "why now" question answers itself from the inside. The institutions operating the legacy rails are building the replacement, because the legacy rails cannot keep up with the settlement cycle those same institutions now have to meet.
Driver Four: The Stack Is Finally Strong Enough to Carry Real Volume
The fourth driver is the one that maps most directly onto the fourth gap from the 2017-2019 cycle. What failed in 2018 was not the vision, it was the stack. By 2025-2026 that stack is in place.
Bank-grade custody now exists across every major tokenized product, with named qualified custodians attached to BUIDL, BENJI, OUSG, ACRED, and other flagship funds 24. Securitize has become a reference transfer agent and issuance platform with multi-issuer deployments across BUIDL, ACRED, and others, and with BlackRock's $47 million strategic investment sitting directly on its cap table as a signal of incumbent commitment 25. Apollo's ACRED tokenized credit fund launched through Securitize in January 2025 and has since been integrated as collateral on Morpho vaults across Ethereum, Polygon, and OP Mainnet, a live example of an institutional product operating inside permissioned DeFi 26.
Tokenized deposits now sit alongside stablecoins as settlement assets. Kinexys deposit tokens, JPMD on Base, and Singapore's Project Ensemble all give regulated institutions a cash leg that is native to the ledger where the asset leg sits. Public chains used by institutional products now span Ethereum, Solana, Aptos, Avalanche, Polygon, Arbitrum, and Optimism, with BlackRock's BUIDL deployed across eight of them 27.
Permissioned DeFi rails, including Morpho vaults, Aave's Horizon initiative, and stablecoin systems such as Ethena's BUIDL-backed USDtb, allow tokenized RWAs to be used as collateral inside controlled perimeters where onboarding and compliance are enforced without destroying composability 28.
The diagram has one job: to hold the contrast in place. Each layer that failed between 2017 and 2019 now has a production-grade equivalent. The system that can absorb institutional flow is not a future system. It is the one operating today.
The Direction of Institutional Capital
A fair reader will ask what this adds up to in numbers. Market projections for tokenized real-world assets diverge widely. McKinsey's base case sits at roughly $2 trillion by 2030, with a $1 trillion to $4 trillion range 29. A joint BCG and Ripple analysis models a path to approximately $18.9 trillion of tokenized assets by 2033, with a conservative case near $12.5 trillion and an optimistic case near $23.4 trillion 30. The quantitative case will be the subject of section 3.1, and this paper will not anchor on any single number.
The more credible signal for the "why now" question is not the forecast. It is the direction of the capital that can move forecasts. The custodians, depositories, and asset managers who built the existing system are now pointing their own balance sheets at tokenized infrastructure. BlackRock has deployed BUIDL across eight chains and invested in its own transfer agent. JPMorgan is running tokenized deposits, tokenized money market funds, and tokenized private equity on Kinexys. DTC has obtained no-action relief to tokenize the equity and Treasury markets it already settles. Franklin Templeton is extending BENJI across chains. Apollo and Securitize are expanding ACRED into permissioned DeFi. Citi is piloting trade finance tokenization with PwC on Solana. Larry Fink's 2025 Chairman's Letter states bluntly that "every stock, every bond, every fund, every asset can be tokenized," and Jamie Dimon's 2026 Annual Shareholder Letter frames the same shift from the competitive side 31. Both quotes come from institutions that would have no reason to write them if the infrastructure were not ready.
When the incumbents fund, staff, and regulate the disruption of their own rails, the timing question is mostly settled.
The Four Drivers Arrive Together
The single analytical move worth carrying out of this section is that the drivers above are not a list; they are a system. Each reinforces the others. Regulatory clarity alone would not move institutional capital without a stack capable of carrying it. A mature stack alone would not generate demand without the stablecoin pool and the settlement pressure pushing regulated flows toward it. Stablecoin demand for yield alone would not find a compliant outlet without the regulatory frameworks that make tokenized Treasuries issuable and auditable.
T+1 pressure alone would not change behavior without the technology and the rules to let atomic settlement actually operate. The reason 2024-2026 is structurally different from 2017-2019 is that each of these four drivers arrived at approximately the same time, in the same jurisdictions, touching the same institutions, and they amplify each other rather than competing for attention.
The next section turns to the audience. If this wave is operational rather than promotional, the relevant question is no longer whether to pay attention, but who in a given organization needs to understand what, and at what depth. Chapter 3 will then make the full opportunity case, Chapter 4 will map the live protocol landscape, Chapter 5 will surface the risks this section has deliberately held back, and Chapter 6 will return to regulation in the detail it deserves.
For the reader, the closing question of this section is simpler. Given that the last wave failed because the supporting system was not ready, and that the current wave is starting from one that is, what follows if the trajectory holds?
- The 2017-2019 tokenization wave failed on four specific gaps: legal ambiguity, no institutional buyers at size, thin custody and issuance infrastructure, and shallow secondary liquidity. Each of those gaps now has an operational replacement.
- Operational regulatory frameworks are live in the jurisdictions that matter: the EU's DLT Pilot Regime and MiCA, the UK Digital Securities Sandbox, Switzerland's DLT Act, the US GENIUS Act, SEC tokenized-security guidance, MAS Project Guardian, and HKMA stablecoin licensing.
- Stablecoin market capitalization reached roughly $317 billion by April 2026, issuers held approximately $200 billion in US Treasuries by 31 March 2025, and the GENIUS Act's ban on native yield pushes holders into tokenized Treasuries as the only compliant on-chain outlet.
- The move to T+1 settlement in the US on 28 May 2024, with the EU, UK, and Switzerland aligned on 11 October 2027, has pulled incumbents like JPMorgan (Kinexys, $3 trillion cumulative) and DTC (SEC no-action pilot covering Russell 1000, Treasuries, and major-index ETFs) into building the replacement rails themselves.
- Forecasts range from McKinsey's $2 trillion by 2030 to BCG and Ripple's $18.9 trillion by 2033, but the stronger signal is that BlackRock, JPMorgan, Franklin Templeton, Apollo, Citi, and DTC are now deploying their own balance sheets against the same thesis.