Asset Tokenisation Landscape & Outlook 2024

Published in

RockawayX

16 min readJun 13, 2024

A Blooming Ecosystem

The tokenisation landscape is beginning to demonstrate signs of diversifying and maturing into a robust ecosystem. The journey began with tokenised dollars (i.e. USD stablecoins) in 2014, and has gradually moved up the asset risk curve to treasury bills, commodities and private credit. Many of these projects have become key pillars in DeFi, existing at the intersection between the real world and blockchains.

As of today, there are over $150bn worth of tokenised assets spanning more than 8 asset classes — collectively representing 6% of crypto’s $2.5 trillion market cap. Despite this growth, we’re still in the early stages of adoption, particularly outside of stablecoins. For reference, the M2 money supply is $20 trillion, global equities are valued at $98 trillion, debt securities at $129 trillion and residential real estate at $287 trillion.

Excluding stablecoins, the value of tokenised assets that sit on public blockchains are worth over $3 billion — with T-Bills, commodities and private credit constituting 80% of this. The remaining opportunity for tokenised assets, namely real estate, private / public equity and corporate bonds, has not yet been realized.

Figure 1: Tokenised Asset Landscape 2024 (source: RockawayX)

Drivers of Tokenisation

Tokenised assets that have found the most product market fit (PMF), typically share a combination of the following key characteristics:

High Underlying Liquidity: Reflects the ease of converting the underlying asset to cash.
Uncorrelated Yield/Return Profile: Shows if assets provide yield or returns, not directly linked or correlated to crypto markets.

The quadrant below highlights this, showing that assets with high underlying liquidity (dollars, T-Bills, commodities) are the ones that have had the most adoption on-chain. The correlation scale (LHS) shows that assets that are more correlated with crypto markets have less demand from market participants today — even if they have high liquidity (e.g. public equities).

Figure 2: Product Market Fit vs. Underlying Liquidity of Tokenised Asset (Source: RockawayX)

In the following sections, we dive into each segment, providing a snapshot of the current market and highlighting the factors that have influenced their adoption — or lack thereof. We give our outlook for each asset, exploring factors that could lead to increased adoption in the future.

1. Stablecoins ($150 billion MC)

Figure 3: Total Supply of Stablecoins (source: The Block)

Stablecoins have solidified themselves as crypto’s unit of account and are favoured due to their high liquidity, accessibility and composability across the DeFi ecosystem. Although they represent less than 10% of crypto market cap, they make up 70–80% of all on-chain transactional volumes and settled.
Early adoption was driven by challenges that offshore centralised exchanges (CEXs) encountered in securing fiat banking accounts. Instead of processing bank transfers for each customer deposit / withdrawal, transactions were settled on-chain via stables. For investors, having an on-chain stable unit of account was much needed at a time where BTC was the best alternative.
Today, stablecoins are widely adopted in countries with unstable currency regimes such as (Chainalysis) Argentina, Turkey and Nigeria — as a means to escape their restrictive banking systems and their local currencies. In these countries, legacy payment rails are being replaced by blockchains, as emerging Fintech Apps (Yellow Card, Lemon, Belo) that offer stablecoins as a means of payment.
Fiat-backed stablecoins represent 94% of the market and have grown over 60% since the beginning of the year. The remaining 6% of the market is comprised of crypto-backed stablecoins, which are further separated from the banking system (Liquidty, DAI, crvUSD). An emerging category is yield bearing stablecoins — where the issuers distribute earnings (from underlying T-Bills) to holders, but these have no meaningful market share as of today.
Incumbents have stayed strong (notably Tether) but we have also seen new entrants into the space. Paypal’s $PYUSD reached $200m market cap and the brainchild of a crypto startup, Ethena’s $eUSD has had a meteoric rise — reaching $2.3 billion market cap within just 4 months of launch.

Outlook

We expect the market share of yield-bearing stablecoins to continue growing as they are adopted as collateral/units of account on CEXs and DEXs. An early example of this is Ethena’s USDe being integrated as collateral to trade futures on ByBit, unlocking greater capital efficiency for traders.
Outside of the US, regulatory catalysts will drive the adoption of non-USD stablecoins, particularly the Euro. Protectionist legislation in the EU (via MiCA) limits the use of non-USD stablecoins in payments and is already leading to CEX compliance and the expansion of Euro pair liquidity (CoinDesk).
A broader trend we anticipate, with increasing regulatory clarity, is the use of stablecoins as payment infrastructure by both web2 neobanks/payment apps such as Revolut and PayPal, and web3 native startups like GnosisPay, Sling, Clave, and Due.

2. Treasury Bills ($1.5 billion MC)

Figure 4: Market Cap of T-Bills (source: RWA.xyz)

Increasing interest rates in 2022, at a time when DeFi yields were low, set the stage for the tokenisation of treasury bills (T-Bills). Since the start of 2023, there has been a x10 growth from a $100m market cap to over $1bn today.
The rapid growth of the market can be credited to the asset’s high liquidity and its capacity to generate yield, which has established it as a new benchmark for DeFi yield.
Recent growth has been driven by $BUIDL from BlackRock, surpassing over $300m in tokenised bonds within a month of launching. Franklin Templeton’s $FOBXX, one of the first tokenised T-Bills, has also experience rapid growth and surpassed $380m in issuance.
Retail users experience friction accessing tokenised T-Bills (due to KYC requirements), but the majority of direct customers are institutional — the clients of the TradFi issuers and crypto institutions. There are also more accessible options by issuers such as Ondo and Mountain Protocol which utilise secondary markets on permissionless DEXs.

Outlook

We foresee a transformative shift in the finance sector, as bond investment becomes more accessible and efficient, due to the availability of those securities on public blockchains. Indeed, Larry Fink, CEO of Blackrock, emphasised the role of tokenised bonds to enable “instantaneous settlement” and significantly cut transaction costs.
Beyond the growing interest from TradFi issuers’ legacy customers, we anticipate that the near-term growth will be spurred by crypto natives’ increasing demand for yield-bearing stablecoins — especially during a market downturn where T-Bills will act as DeFi’s baseline rate.
Outside of uptake by DAOs and crypto native entities, adoption of yield-bearing stables will be driven by the increasing popularity of L2s offering native yield (Blast via sDAI, Manta via USDM). Integration into payment applications / challenger banks are also an avenue for growth.

3. Commodities ($1 billion MC)

Figure 5: Market Cap of Commodities Tokens (source: Coingecko)

Tether and Paxos began tokenising gold in 2020 and reached $200m in the first year. Today, gold ($XAUT, $PAXG) remains the most popular tokenised commodity, with over $900m tokenised. A newcomer, Kinesis, launched $KAG and has since tokenised $100m in silver.
Although Tether’s $XAUT claims 57% market share, $PAXG by Paxos has over 32k holders, close to x20 more holders than $XAUT. By comparison, there are <1k holders of all the T-Bill tokens. Some of the largest holders include Tether and Paxos themselves.
The popularity of commodities can be attributed to their high underlying liquidity, an uncorrelated return profile* and their ease of access. Much like stablecoins, they are freely transferable and tradable through DEXs. Benefits compared to traditional ETFs including instant settlement times (vs. T+2) and low custody fees.

*Typical correlation coefficient between $BTC and $GLD is <0.5 and currently. sitting at 0.35.

An underrated benefit of tokenised assets is their 24/7 tradability. A recent example highlighted by @kaledora (Co-Founder of Ostium Labs), occurred on April 13th (Saturday). Amid rising geopolitical tensions between Iran and Israel, $PAXG traded at a 20% premium to its closing price on Friday, front-running traditional markets before they opened.

Outlook

Tokenised commodities grew rapidly throughout 2021 and into early 2022 during the bull market. As interest rates have risen and bond tokenisation became more prominent, tokenised commodities have stalled.
We don’t see strong near-term catalysts for tokenised commodities uptake. In a sharp market downturn, crypto investors could flee to safer assets on-chain, but commodities would have to vie with bonds now.
Tokenised commodities are primarily geared towards long-term holders, rather than traders. A potential area for growth is in derivative platforms that allow for leveraged synthetic exposure to the underlying asset — for short term speculation and hedging purposes.
Ostium, launching mainnet this year, is one of the only dedicated perpetual trading platforms for commodities. CEXs such as Coinbase have also started venturing into offering oil and gold futures.
Compared to traditional perp trading platforms, DEXs focused on commodities must navigate the nuances of market opening / closing times and have reliable oracles (especially for less liquid commodities with fragmented liquidity).

4. Private Credit ($500m Active Loans, $1.5bn Peak)

Figure 6: Active Loans on Private Credit Protocols (source: RWA.xyz)

Centrifuge is the pioneer in tokenised private credit, as they worked closely with MakerDAO since 2020 to fund trade finance, structured credit and revenue-based financing. Today, MakerDAO constitutes 80% of the TVL on Centrifuge — allocated to structured credit, real estate bridge loans and T-Bills.
Unlike Centrifuge, private credit protocols such as Maple, TrueFi and ClearPool focused on facilitating lending to crypto native institutions (market makers). This class of lending has historically been the most popular — with active loans reaching over $1.5bn in 2021, driven by these protocols.
Private credit protocols grew at a time where market makers were hungry for capital (to scale operations) and lenders were searching for yields. Although private credit is typically illiquid, these loans had short loan durations (3–6 months) and predictable cash-flows — making them appealing at the time.
The events of 2022 (FTX, Terra) severely impacted Maple and TrueFi as borrowers defaulted on close to $50m on loans — leading to a sustained outflow from the sector. On the brighter side, protocols that focused on lending outside of the crypto ecosystem (Goldfinch, Centrifuge), weathered the storm — highlighting the importance of uncorrelated yields.
While the sector’s growth has been slow, partly due to the emergence of alternatives (T-Bills), active loans have steadily risen from a low of $250m in 2023 to over $500m today. Most of these loans are made to fintechs, real estate developers, and consumers in emerging countries, with almost no loans being made to market makers today.

Outlook

Private credit credit protocols today, especially those focused on emerging markets (Goldfinch, Credix), have the problem of adverse selection — where borrowers who are most likely to pose a risk of default are the ones seeking loans from alternative sources.
Most recent example was when LendEast, a borrower on Goldfinch defaulted and was unable to pay back $6m. There are also borrowers that are late / under grace period (totalling $12m). Critics have pointed out that the credit assessment and on-going monitoring conducted by a third-party auditors was poorly executed.
Although these protocols make the flow of funds more efficient and can lower the cost of borrowing, at their current state they are not effective at determining the creditworthiness of borrowers. Due to this, we see no near-term catalysts to drive private credit protocols focused on small / medium size businesses in emerging countries — especially given the on-chain alternatives today.
On private credit to crypto market makers, we expect there to be a comeback in this sector as there is more transparency into the borrower’s financial health. We are also expecting the rise of governance minimised, un-opinionated protocols that focus on the infrastructure to facilitate P2P loans. This means the lenders themselves have to perform the due diligence on borrowers (as opposed to designated third-parties on the protocol). This approach is taken by a newcomer — Wildcat Protocol.

5. Real Estate ($240m market cap)

*Figure 7: Tokenised Real Estate, Market Landscape (source: RockawayX)*

Real estate (RE) is one of the largest addressable asset classes, worth over $300 trillion. By offering holders both uncorrelated returns on the underlying and yield in the form of predictable rental income, RE presents a compelling investment opportunity for tokenisation.
One of the key factors that have held back this sector has been the illiquidity of real estate. Tokenised versions can be less liquid than the underlying since a majority holders must agree to begin a sales process. Secondary markets for tokenised assets, such as tZero and Securitize, already exist and should promote liquidity, but are still early and lack volumes.
Whilst there have been multiple attempts at scaling RE tokenisation, the most successful approach was taken by RealT, which has tokenised over $100m in properties and has over 20k active investors since its 2019 launch. The “RealT RMM” uniquely allows all assets tokenised on the platform to be used as collateral in their lending pool, with over $20m in liquidity.
Since the start of 2023, total value of tokenised RE grew from $177m to over $230m, largely driven by over 40m tokensied by RealT. Despite the traction, it can still be thought of as a localised ‘pilot’, as the majority of the properties on the platform are concentrated in Detroit, and the platform offers minimal diversity today.

Outlook

Tokenising real estate could theoretically reduce barriers to entry for home purchase, but these assets remain illiquid, especially when compared to investors’ alternatives for getting exposure to real estate markets, like major ETFs offered by Vanguard and iShares.
If tokenised real estate takes the form of ETFs, where there is an actively managed real estate portfolio, investors can gain exposure to their preferred markets with the key benefit of increased liquidity.
Looking ahead, we expect the growth in this segment to be driven by the tokenisation of such real estate funds. A notable startup in this arena is Villcaso, whose USH (U.S. Housing Fund) token is supported by home equity investments (HEI). These investments offer greater liquidity due to early settlement options, although they don’t have fixed income.
Beyond new startups, we also anticipate large traditional institutions to begin tokenizing their real estate funds. Blackrock, which manages over $28 billion in real estate funds, is a prime candidate to venture into this.

6. Corporate Bonds ($215m Market Cap)

*Figure 8: Tokenised Corporate Bonds, Market Landscape (source: RockawayX,* *STOMarket*)

Corporate bond issuances on public blockchains remain in the very early innings, with Société Générale (SocGen) being the only institution to pursue it in a meaningful way. Since its 2019 start, the French bank’s FORGE platform has hosted 5 separate issuances, totalling over $170m raised.
Other issuances have been on private blockchains. SDX in Switzerland collaborated with UBS and various cantons (Basel, Lugano, Zurich) to issue bonds amounting to $764m. The Hong Kong Monetary Authority and the European Investment Bank have partnered with HSBC and Goldman Sachs respectively, issuing bonds totalling $380m.
Although corporate bonds present desirable characteristics, such as high liquidity (on AAA rated) and a less correlated yield source — there have historically been no platforms catering to crypto natives, until recently. A difficulty here is convincing the largest companies to start issuing bonds on public blockchains.
Both Obligate and PV01 recently launched their bond tokenisation platforms and are going after this market. By addressing the current frictions to access the market and deploying on a public blockchain to maximise composability, tokenised bonds on public blockchains are primed for growth.

Outlook

The success of these new platforms will depend on the types of bonds they offer & the liquidity they can facilitate. Investors will prioritise bonds with short durations and high underlying liquidity. A further differentiator will be in platforms’ allowing investors to use tokenised bonds as collateral for borrowing and leverage.
On-chain bond issuances can transform crypto credit markets. For example, market makers could raise capital through short-term bond issuances — which would ease their seemingly insatiable demand for a very small pool of lending capital available to them today. As platforms such as PV01 make it simpler and faster to issue bonds, more digital asset companies will explore these financing options.
An ongoing challenge will be luring varied companies / protocols (outside of market makers) to issue bonds in a high interest rate environment, when equity financing is a cheaper option.

7. Private Equity / Funds ($450m MC, $200m Raised)

*Figure 9: Tokenised PE / Funds, Market Landscape (source: RockawayX,* *STOMarket*)

The first tokenised private equity (PE) fund was SPiCE VC, issued on Securitize in 2017. Since then, Switzerland has been the hub of experimentation in this area, after 2021 legislation allowed for shares and tokens to be issued as one. Despite the regulatory tailwind, there has been only ~$200m raised for tokenised PE / funds to-date, with tZero’s 2018 raise accounting for $134m of that total.
At the surface, tokenising PE / funds has a strong value proposition of lowering barriers to entry to a notoriously exclusive and inaccessible market. Tokenised funds’ lower buy-ins help here; for example, KKR’s Health Care Growth Fund lowered the required buy-in from $5 million to $20k for its tokenised product. PE’s historically outsized return profile compared to other sectors makes it attractive terrain for on-chain capital.
However, the illiquid nature of these investments — with long lock-up periods (3+ years) and low liquidity on secondary markets — is a headwind to adoption. This problem is exacerbated by the fact that there are frictions to access these securities due to the fragmented landscape of trading platforms, each with their own on-boarding.
The primary players in this segment are the web3 native tokenisations platforms such as tZERO, Securitize, ADDX and Aktionariat — which deploy on public blockchains such as Ethereum, Polygon and Avalanche. The majority of these platforms have vertically expanded to offer tokenisation, primary issuance, custody, and secondary markets.
Figure Securities has tokenised over $400m of asset backed securities on Provenance Blockchain. Although Provenance is a permissionless, public blockchain — its strong affiliations with Figure (e.g. see dApps deployed there) leads to the “semi-private” categorisation and exclusion from our market cap calculation.

Outlook

The benefits of opening up previously inaccessible markets and lowering barriers to entry are evident, but growth challenges persist; private equity’s illiquidity and comparably high-return DeFi yields will dampen adoption in the near term.

8. Public Equity (<$5m Market cap)

*Figure 10: Tokenised Public Equity, Market Landscape (source: RockawayX,* *STOMarket*)

Mirror Protocol popularised the trading of public equities on-chain in 2021, reaching over $1bn in total value locked (TVL) within three months of its launch. Despite providing only synthetic price exposure (no tokenised asset), Mirror attracted market interest as liquidity providers (LPs) earned yield by catering to traders seeking leveraged exposure. The platform was permissionless, fuelling accessibility and adoption.
The first iteration of tokenised stocks was introduced by Binance in July 2021. Unlike synthetic price exposure, a single token here represents a share of the underlying stock held by a custodian, entitling holders to dividends. FTX also made its tokenised equity debut in October 2021, partnering with the same custodian/broker as Binance — CM-Equity AG.
The successive blows of 2022 first led to the downfall of Mirror in May (after the UST de-peg) and FTX in November. Binance had already discontinued stock tokens in October 2021, citing a change of commercial focus and regulatory issues.
Tokenised stocks have made a return, albeit with minimal fanfare. DeFi protocols, like Backed Finance, offer them but have a collective market cap of less than $5 million. Compared to web2 offerings, tokenised equities currently have less liquidity than their traditional counterparts. The absence of dedicated lending pools also means these assets cannot be leveraged or shorted.
Unlike commodities, tokenised equities are not permissionless (since they are securities) and are generally have a high correlation to crypto* — especially tech stocks. All of these factors lower their value proposition to today’s crypto native investors.

*Typical correlation coefficient between $BTC and $NASDAQ is > 0.5 and currently sitting at 0.70. ($GLD is 0.35)

Outlook

As a longer term trend, we expect the popularity of tokenised equities to increase, especially in emerging markets where access to foreign public markets is restricted.
That being said, tokenisation platforms must navigate regulatory hurdles to be able to distribute to customers in countries with restrictive regimes. There is also an educational hurdle to overcome in these regions where financial literacy is limited.
For investors in developed countries (most crypto natives today), easy access to a vibrant stock market and high correlation with crypto (i.e. “risk on”) lessens the appeal of tokenised versions.
Platforms offering leveraged have historically found success, so building out lending pools and other unique functionality around tokenised stocks could increase the appeal.

Looking Ahead

Looking ahead, we anticipate continued growth of yield bearing stablecoins — which will also drive the tokenisation of T-Bills. The status quo of stablecoin issuers keeping yields for themselves is slowly changing. Growth may be hindered by falling interest rates in the short term, but the trend of tokenising T-Bills will continue due to the efficiencies offered.
Protectionist legislation, especially in the EU, will also drive the uptake of non-USD stables. We anticipate the initial adoption to be driven by European CEXs that replace EUR fiat and USD stablecoin pairs with EUR stablecoins. As stablecoin use cases expand into payments (in developed countries), EUR stables will also play an instrumental role.
From the segments that haven’t yet found their PMF, we anticipate tokenised corporate bonds to grow as there is a revival of crypto credit markets (specifically to market makers). This lending / borrowing can also occur on private credit protocols, and we anticipate that market makers will be using un-opinionated protocols, that resemble a P2P market, to borrow capital.
As for real estate and private equity, we don’t see near term catalysts to drive issuance — largely due to the illiquidity of the underlying assets, which is misaligned with on-chain investors’ current strong preference for liquid assets.
In the case of public equities, accessible web2 alternatives and high correlation with crypto diminishes their value proposition for Western on-chain investors. However, with more targeted offerings and outreach, we see an opportunity in addressing developing country investors’ weak access to global securities.
Overall, the characteristics of assets that have found PMF reflect the preferences of the current on-chain investor base (DAOs, crypto-native institutions, degens). Diversification of this demographic over time — with regulatory clarity, education, and further institutional adoption — will lead to higher quality assets being tokenised (in real estate, private equity, corporate bonds). The development of a more robust on-chain financial system where better workflows allow assets to have greater use / overlap (i.e. composability) will reinforce those trends and accelerate adoption.

Special thank you to peers that took the time to review this blog and gave their expert feedback: Donn (Tioga Capital), Nassim (Eterna Capital), Asher (Target Global), Kaledora (Ostium) and of course the RockawayX Team.