Author: Alex Zhang, Co-founder of Pharos
Tokenizing real-world assets (RWA) is not a self-sufficient solution to traditional financial problems. To claim so would be one-dimensional. Currently, RWA tokenization is under immense performance pressure, despite showing clear signs of value and progress.
Despite its positive development trajectory, criticism of RWA tokenization is substantial. Critics argue that mere decentralization is not enough.
It is too complex for the general public. Regulatory hurdles are insurmountable. There is a lack of infrastructure. Fraud is rampant. Manipulation is possible. There is a lack of auditing. There is a lack of standardization. And so on.
These critics fail to recognize that we may need to break some eggs in the process of establishing an institutional-level framework that can position RWA tokenization at the core of the new global economy. Sweetness follows bitterness.
Significant and intentional work is underway to establish compliant top-tier RWA systems to overcome the inefficiencies of traditional finance. These developments help bridge global gaps, particularly in treasury and real estate. International investors will not yield to the flaws of paper contracts, the opacity of intermediary transactions, and general dispute management.
RWA tokenization is providing an antidote, but like some medications, the initial taste may be very bitter. The inherent resistance to change leads people to criticize or underestimate RWA instead of seeing their potential. However, converting tangible assets into programmable, divisible, and instant settlement digital tokens is necessary for blockchain maturity. Institutional funds require institutional thinking.
As Coinbase co-founder Fred Ehrsam famously said:
Consider the stablecoin market. It is now valued at over $260 billion, demonstrating strong demand for RWA and a massive market opportunity. For the biggest success stories of RWA tokenization, the opponents seem unusually quiet.
Unlocking a trillion-dollar market will be fraught with obstacles, as it depends on developing a robust regulatory framework and carefully designed token economics. These, in turn, must align incentives with sustainable growth. Failing to integrate carrots and sticks while ignoring the inefficiencies of existing laws could leak value to equity holders and lead to failure.
Those critics citing complexity and lack of infrastructure overlook the excellent work that has already been accomplished. On-chain Know Your Customer (KYC), Anti-Money Laundering (AML), identity management, and institutional-grade infrastructure for custody, settlement, and reliable valuation are all key components being developed and launched. What remains is a standardized framework with limited liability structures and rapid cross-border compliance pathways. It is only a matter of time.
The momentum of the real world is already visible. These are not pilot projects; they are signs of a paradigm shift that is already underway.
The notion that regulatory uncertainty is a deterrent is changing, and the situation has become significantly clearer in recent weeks and months. The implementation of the U.S. "Guidance and Establishment of a National Stablecoin Innovation Act" (GENIUS Act) is a clear signal that explicit regulation can bring greater legitimacy.
The EU's "Regulation on Markets in Crypto-Assets" is set to phase in by 2025. It establishes clear and comprehensive rules for token issuance, asset-backed tokens, and stablecoins across all 27 member states. This coordination will unleash more compliant RWA products in European financial centers. In Asia, Singapore's Guardian project has already piloted tokenized bond issuance and fund tokenization with major banks like DBS Bank and JPMorgan. Japan's Financial Services Agency has also introduced specific guidelines for stablecoins and security tokens, establishing a positive regulatory pathway for asset tokenization in East Asia.
The U.S. is not alone; Hong Kong, another major innovator in the blockchain space, is implementing new stablecoin regulations. Japan has also introduced its own regulatory framework, aiming to shift more capital eastward and engage in financial innovation.
These key recent developments, combined with growing support from traditional financial partners and the market, indicate a clear path for RWA to achieve mainstream adoption. Sentiment is changing, the market is growing exponentially, and sentiment may reverse before the end of the year. We are moving upward, away from the lawless Wild West, into the realm of well-governed and legitimate markets.
While opponents sometimes raise valid points, those closer to the action know that criticism has become actionable feedback. Every negative comment about RWA tokenization helps spur new regulatory frameworks, new institutional partnerships, and new infrastructure. Ironically, the more it is criticized and ignored, the more important and reliable it becomes.
RWA tokenization is not a localized trend; it is happening in global financial centers. It is everything that traditional finance is not, and people are beginning to realize this.
The market has grown fivefold in just three years. Whether skeptics like it or not, the vision for RWA is rapidly becoming a reality. We have moved beyond speculation. We are building infrastructure. We are establishing regulatory consistency. The road has been bumpy, but today that road is paved. Everyone can reimagine how value is created, owned, and exchanged on-chain.
Author: Alex Zhang, Co-founder of Pharos.
Related: Standard Chartered: The scale of tokenized RWA will reach $2 trillion by 2028, on par with stablecoins.
This article is for general informational purposes only and is not intended to be, nor should it be construed as, legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Original: Opinion: Don’t just tokenize assets, build the institutions that support them
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