Source: Cointelegraph
Original: “Without RWA Tokenization, Traditional Financial Markets Won't Survive”

Perspective from: Abdul Rafay Gadit, Co-founder of ZIGChain

The U.S. tariff system has clearly fueled a global trade war, forcing investors to explore stable, yield-generating alternatives. In-depth analysis shows that issues of liquidity, opacity, and scalability have long plagued global financial markets. They were already unhealthy, regardless of the trade war.

The tokenization of real-world assets (RWAs) has emerged—thankfully. First, they ensure predictable returns, providing investors with a safe haven in uncertain market environments and ineffective volatility.

Most importantly, RWAs are a lifeboat for traditional finance, as they enhance market liquidity, make opaque markets more transparent, and democratize finance. Traditional financial markets need to integrate—rather than resist—RWAs to remain relevant in the next decade.

The Salvific Role of RWAs

In traditional finance, the "computability" of capital is achieved through slow, expensive, and unreliable intermediaries (like banks). For example, these institutions primarily fail to quickly rebalance portfolios.

This limits the scope of the market, causing significant losses for consumers. There is a pervasive trust issue, and fund managers face enormous administrative burdens. The end result is that everyone suffers except for those intermediaries profiting from it.

This is also why private equity financing fell by 24% in 2024 (according to a McKinsey report). Similarly, as revealed by SIFMA's 2025 Capital Markets Outlook, the volume of U.S. stock issuances has declined by an average of 0.6% annually since 2020. During this period, initial public offerings also dropped by 8.5%.

RWAs address these issues. They simplify and streamline portfolio management, allowing for scalable capital deployment even in turbulent markets.

Tokenization automates verifiable transactions, driving a precise, deterministic, trustless economy—completely disrupting the status quo. It also provides investors with low-risk, low-cost, and quick access to existing and emerging global financial markets.

It's no wonder that on-chain RWAs grew by 85% in 2024, exceeding $15 billion. This trend continues to gain momentum. RWAs are expected to remain a top investment category in the crypto space.

RWAs recently reached a new all-time high, surpassing $17 billion, with over 82,000 asset holders. Notably, tokenized private credit is the largest asset in the RWA sector, with a market cap exceeding $11 billion.

Clearly, in the face of $10 billion in liquidations and ongoing market volatility, investors are opting for RWAs. Moreover, this asset class is allowing private credit to make a comeback, laying the groundwork for future financial markets.

“Smart Money” Bets on RWAs

JPMorgan, BlackRock, UBS, Citigroup, Goldman Sachs—all renowned companies in traditional finance have entered the RWA space. The capital inflow from these “smart money” institutions has helped on-chain private credit grow by 40%, while tokenized government bonds overall grew by 179%.

All of this may just be conventional diversification and capital expansion. However, funds like Franklin Templeton's Franklin On-Chain U.S. Government Money Fund (FOBXX) and BlackRock's U.S. Dollar Institutional Digital Liquidity Fund (BUIDL) suggest longer-term motivations.

Initiatives like FOBXX and BUIDL focus on transforming the money market through improvements such as shorter settlement times, easier liquidity access, and better trading environments.

They leverage tokenization technology to introduce new yield-generating opportunities in traditionally illiquid markets (like private credit). According to PwC, this could be a $15 trillion disruption. S&P Global also views private credit tokenization as the “new digital frontier,” addressing liquidity and transparency issues.

As a result, RWAs are becoming a viable and more attractive option for institutional investors, who control nearly a quarter of the $450 trillion traditional financial market. This is already a strong warning signal—and demand for RWAs from “retail” users (i.e., the remaining three-quarters of the market) is also on the rise.

Retail as the Ultimate Target for RWAs

Institutional adoption of RWAs is crucial for raising their initial awareness. Regardless, their actions will impact the market. However, in the long run, individual retail users will be the group that benefits the most from RWAs.

RWAs make capital markets more accessible to ordinary investors, including those who have never accessed the banking system. For example, fractional ownership allows less capitalized investors to access large assets that were previously only available to wealthy family offices and institutions.

Because of these advantages, retail users will choose RWAs over traditional, exclusive financial assets and markets. Now, through solutions like social investment platforms, retail users can access new financial opportunities more intuitively and effortlessly, making it all self-evident.

Reports from Mastercard, Tren Finance, and VanEck showcase the enormous growth potential of RWAs. In the next four to five years, this growth could range from $50 billion to $30 trillion.

Widespread retail adoption will drive this growth; unless traditional markets adapt or adopt RWAs, they will lose the majority of users. As institutional and retail capital flows into this emerging field, traditional systems will face a life-or-death test.

Currently, there are powerful tools and platforms leveraging RWAs to bridge the gap between traditional financial markets and emerging markets. This makes the issue more about intent and priorities than anything else.

Catch up or be left behind—that's the crux of the message. It is an urgent challenge, as it has waited too long. The best part is that traditional assets on-chain, utilizing RWAs, will create a win-win effect for issuers, institutions, and retail users. This is precisely what the world needs from a financial perspective, and it deserves all the effort.

Perspective from: Abdul Rafay Gadit, Co-founder of ZIGChain.

Related: Blockchain Interoperability Will Accelerate Institutional Success

This article is for general informational purposes only and does not constitute legal or investment advice. The views, thoughts, and opinions expressed in this article are solely those of the author and do not necessarily represent or reflect the views and opinions of Cointelegraph.

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