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There is much talk about the advantages of tokenising real-world assets, but does this approach also boost liquidity in markets or is this the wrong way to consider the issue?
The following article is by Vladimir Tikhomirov, who is
co-founder of Algebra,
a decentralised finance infrastructure company. He is based in
Dubai. Tikhomirov addresses the issue of why it is important
not to assume that tokenisation of assets is not the same as
making them more liquid. This is particularly significant when
tokenisation can sometimes be considered as a way
od widening access to an asset class.
The editors are pleased to share this content; the usual
editorial disclaimers apply to views of guest writers. To comment
and get involved, email the editors at tom.burroughes@wealthbriefing.com
and amanda.cheesley@clearviewpublishing.com
Tokenisation today is one of the hottest topics in financial
markets. A report by CoinGecko shows how the tokenised real world
asset (RWA) market has tripled over the previous year, reaching
$19 billion and above by the first quarter of 2026.
Almost every other week, there are new announcements about
private credit funds, real estate, or other traditionally
illiquid assets moving onto blockchain infrastructure. One of the
more recent stand-out examples came when Tradable announced its
intention to tokenise up to $1 billion in private credit assets
on Stellar.
More private assets are finding their way on-chain. And it’s not
hard to see the reasons for this trend’s booming growth either:
tokenisation can make assets once reserved for institutional
participants or HNWIs available to a much broader audience.
Between fractional ownership of assets lowering barriers to entry
and on-chain infrastructure, simplifying transfers, there are
many layers of operational friction that tokenisation
removes.
For wealth managers, this creates new opportunities in what they
can offer to their clients. But there is an important distinction
that we need to look at here: making an asset more accessible is
not the same as making it liquid.
That’s a tidbit that I believe has often been lost in
discussions, since a lot of them focused on issuance questions
for a long time. But this is just the first stage of development
for this market. So what comes afterwards?
Having a token doesn’t automatically give you a
market
Once it’s tokenised, a private equity fund or a piece of
commercial property may technically become available for trading
24/7. But the follow-up problem is that buyers, sellers,
competitive pricing, or meaningful trading activity around these
assets do not spring up out of nowhere. It takes more to make
markets liquid than just placing the underlying assets on
blockchain rails.
I believe that this is one of the defining challenges that the
industry needs to tackle in its next phase of evolution. Today,
the number of tokenised assets is growing much faster than the
infrastructure needed to support them. Even major financial
institutions such as the European Central Bank and Citi have
previously commented that secondary market trading is happening
to an “insufficient” extent.
With that in mind, liquidity is at risk of becoming increasingly
fragmented as more assets are being brought on-chain.
Instead of a handful of genuinely useful and actively traded
instruments, the market could end up with thousands of tokenised
assets, each with only a tiny pool of participants.
Naturally, this makes price discovery much harder. That’s before
we recall that private markets have always faced challenges in
this regard, as assets here are typically priced periodically
(rather than continuously) and transactions happen much more
infrequently compared with private markets.
Simply issuing tokens does not eliminate these fundamental
issues. If anything, the contrast becomes more visible, since
investors actively gain the ability to trade more frequently, but
reliable market prices remain out of reach.
Why liquidity matters more as institutions enter the
picture
As institutional participation grows, finding a solution to this
problem becomes even more important. Large investors are unlikely
to allocate any serious capital to markets where prices are
difficult to verify or where even the ability to exit a position
at all remains uncertain. As such, liquidity should be considered
a prerequisite for institutional adoption.
This is why we need to place greater attention to building
market infrastructure around tokenised assets. Matching buyers
and sellers and enabling efficient price formation, all while
also supporting compliance standards desired by large-scale
players, is not simple to achieve.
In some ways, tokenisation counts more as the beginning of a much
larger process rather than the final objective.
The potential of programmable ownership
Here’s another area of tokenisation that I believe deserves more
attention than it is getting at the moment.
We have learned how to convert RWAs to tokens and place them on
blockchain rails, but arguably an even greater opportunity comes
from this technology’s ability to make ownership itself more
dynamic.
Certain actions that require multiple intermediaries can become
completely automated when smart contracts are brought into the
equation. Ownership transfers and compliance restrictions, for
example, could all be embedded directly into the asset
itself.
Imagine, for example, tokens that would restrict ownership and
transactions only to investors who meet specific criteria. Or
distribute income to holders according to their ownership share.
Or, for something different, how inheritance processes could be
streamlined, with tokens automatically transferring to heirs once
predefined legal conditions were met.
Instead of treating ownership records and rules governing that
ownership as separate entities, blockchain makes it possible to
combine both into a single programmable framework. For wealth
managers, this could drastically change the way that private
assets are administered.
Infrastructure must reflect financial
reality
But as fascinating as this vision is, it can only
be successful if tokenisation reflects the realities of
traditional financial markets. As we covered earlier, it’s not
enough to simply bring an asset on-chain and expect it to work
“just like that.”
Private assets don’t operate in the same way as cryptocurrencies.
They come with their own set of legal rights, restrictions,
obligations, and investor rules. Who can own them, how they can
be transferred, what rights investors have, and even when they
can realistically be traded are all defined by long-standing
regulations and market practices. All these are essential parts
of how these markets function, and tokenisation doesn’t
fundamentally change any of it.
If anything, to be effective, blockchain infrastructure needs to
accommodate these realities, rather than trying to work
around them and force traditional assets into models originally
not designed for them.
This is why I am confident that when the industry comes close to
completing tokenisation infrastructure in earnest, it will look
very different from what we have today.
The core question is no longer whether a particular asset can be
issued on-chain. That has already been answered. The next step is
determining whether an efficient market can develop around it.
Can liquidity providers support trading at scale? Can secondary
markets produce reliable prices? Can programmable ownership and
compliance requirements be integrated directly into trading
infrastructure?
Devising answers to these questions will determine in what manner
(and how soon) tokenisation will take its place as a new layer of
global capital markets. Ultimately, the goal is to make sure it
transforms private investing instead of simply digitising it.