The market for tokenized real-world assets (RWA) is set to expand in 2026, driven by increased adoption in emerging market economies, as stated by Jesse Knutson, head of operations at crypto exchange Bitfinex.
Knutson explained to Cointelegraph that emerging market economies face “friction” in capital formation and the attraction of foreign investment.
He noted that tokenizing real-world assets—representing physical or traditional assets on blockchain networks—addresses this issue by facilitating on-chain capital formation and bypassing conventional financial intermediaries. Knutson added:
“Emerging markets also tend to ‘leapfrog’ infrastructure that holds back developed markets, adopting digital rails, including stablecoin settlement, faster than markets with entrenched legacy plumbing.”
Knutson remarked that tokenization also allows for the fractionalization of assets, making investments accessible that may otherwise be too costly for the average retail investor.
He added that companies capable of providing fixed returns to investors but unable to secure traditional financing are the primary beneficiaries of asset tokenization.
In developed economies, fixed-income instruments such as US Treasuries and money market funds rank as the most sought-after assets for tokenization, whereas real estate and commodities dominate in developing economies, he noted.
Knutson predicts that the total market capitalization of tokenized RWAs could reach several trillion dollars over the next decade, dependent on major issuers transitioning from pilot programs to actual commercial products.
Related: Tokenization will disrupt finance faster than digital disrupted media: Crypto exec
Tokenizing traditional financial assets on-chain presents various key challenges
Despite the optimistic outlook for the RWA market, several challenges remain, including the legal enforceability of on-chain contracts, ensuring sufficient liquidity for settlement without slippage, and establishing investor protection frameworks, according to Knutson.
He indicated that developing uniform interoperability standards across different blockchain networks and platforms issuing tokenized assets is essential for achieving mass adoption.
The variety of token standards and disparities between permissioned blockchains and permissionless crypto ecosystems pose technical hurdles for RWA issuers.
Issuers need to develop tokenized products that can be transferred within the various crypto ecosystems and used as collateral in decentralized finance (DeFi) applications to unlock the full potential of on-chain assets.
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