In January 2024, BlackRock launched its tokenized fund BUIDL on the Ethereum network, surpassing $500 million in assets under management within six months. This was not an experiment. It was the definitive institutional validation that asset tokenization has evolved from a promise into real financial infrastructure.
According to Boston Consulting Group, the tokenized asset market will reach $16 trillion by 2030, equivalent to 10% of global GDP. And according to Roland Berger, tokenization of illiquid assets alone (real estate, art, commodities) will account for $10.9 trillion by that date.
Whether you are an innovation leader at a corporation, a fintech founder, or an investor looking for new asset classes, this guide covers everything you need to know: what tokenization is, how it works technically, which asset types can be tokenized, the standards that matter, the current regulatory framework, and how to get started.
What is asset tokenization?
Asset tokenization is the process of representing ownership or economic rights over a real-world asset as digital tokens on a blockchain. Each token is a programmable, transferable digital unit representing a fraction of the underlying asset.
This is not simply "digitizing" a certificate. Tokenization introduces three properties that do not exist in traditional registries:
- Fractionalization: a $2 million commercial property is divided into 20,000 tokens at $100 each. Retail investors gain access to asset classes previously reserved for high-net-worth individuals.
- Programmability: asset rules (rent distribution, transfer restrictions, regulatory compliance) are encoded in smart contracts that execute automatically.
- Global transferability: tokens can be traded on secondary markets 24/7, eliminating intermediaries and reducing settlement times from T+2 (two business days) to T+0 (seconds).
Tokenization vs. digitization
These concepts are frequently confused. Digitization converts a physical document into a digital file. A PDF of a deed still requires a notary to transfer. Tokenization creates a blockchain-native digital representation of the asset, where transfer, compliance, and settlement happen on-chain without manual intermediaries.
Tokens vs. cryptocurrencies
Cryptocurrencies like Bitcoin or Ether are native assets of their respective blockchains. Asset tokens represent rights over something external to the blockchain: a property, an artwork, a fund share. This distinction is key for regulation, as we will see when discussing MiCA.
How asset tokenization works: step by step
Tokenization is not a single step but a value chain involving legal, technical, and operational dimensions. Here is each phase:
1. Asset selection and due diligence
Not every asset is an ideal tokenization candidate. Key criteria include:
| Criterion | Why It Matters |
|---|---|
| Illiquidity | The most illiquid assets (real estate, art, private equity) benefit the most from tokenization-driven liquidity |
| High unit value | High-priced assets benefit from fractionalization to broaden the investor base |
| Predictable cash flows | Rents, dividends, or royalties facilitate automated distribution via smart contracts |
| Clear legal framework | The asset must have a legal structure that permits representing rights as tokens |
2. Legal structuring (SPV or direct issuance)
In most jurisdictions, tokens do not grant direct ownership of the asset. A Special Purpose Vehicle (SPV), typically a limited company, holds the asset. Tokens represent shares in the SPV, granting economic rights (rents, capital gains) to holders.
In the EU, MiCA requires that offers of security tokens comply with the prospectus regime or, where applicable, the DLT Pilot Regime for financial instruments.
3. Token design and standard selection
The technical standard determines the token's capabilities. The main options:
ERC-20: the basic fungible token standard. Suitable for utility tokens, but lacks transfer restrictions or identity verification. Not appropriate for regulated security tokens.
ERC-1400: Security Token Standard. Introduces partitions (tranches), rule-based transfer restrictions, and controlled issuance. It was the first serious attempt at regulated tokenization, but implementation complexity and a lack of integrated identity verification limited adoption.
ERC-3643: the standard that won. Developed by Tokeny Solutions and used in over 200 issuances with a combined volume exceeding $28 billion. It integrates on-chain identity verification (ONCHAINID) and automated regulatory compliance. It is the standard we recommend for any security token issuance in Europe.
4. Smart contract deployment
The smart contract is deployed on the chosen blockchain (Ethereum, Polygon, and Avalanche are the most common for RWA). This contract defines:
- Total token supply and denomination
- Transfer rules (whitelists, KYC/AML verification)
- Income distribution mechanisms
- Pause, freeze, and token recovery functions (required by MiCA for certain issuers)
5. Distribution and primary market
Tokens are offered to investors through authorized platforms. In Europe, platforms must be licensed as Crypto-Asset Service Providers (CASPs) under MiCA or operate under the DLT Pilot Regime for financial instruments.
6. Secondary market and liquidity
Once issued, tokens can be traded on secondary markets. This is where tokenization delivers on its liquidity promise: assets that previously required months to sell can change hands in seconds. Platforms like tZERO, INX, and Securitize Markets operate as regulated security token markets.
Types of tokenizable assets
Tokenization applies to virtually any asset class, but some categories lead in adoption:
Real estate
Real estate accounts for the largest share of tokenized asset value globally. According to Security Token Market, real estate represents over 40% of total tokenized asset value.
The advantages are direct: a $10 million office building is fractionalized into tokens at $100 each, enabling retail investors to access commercial rents with automatic distribution via smart contract. For a deep dive into this vertical, see our complete guide to real estate tokenization.
Debt and fixed income
Tokenization of corporate and government bonds is growing exponentially. The European Investment Bank (EIB) has issued tokenized bonds on Ethereum worth over EUR 100 million. JPMorgan executes intraday tokenized repo operations through its Onyx platform, processing over $700 billion in notional volume.
The advantages: instant settlement (T+0 vs T+2), reduced intermediation costs, and access to smaller denominations than the typical EUR 100,000 institutional bond minimum.
Commodities
Gold, silver, oil, and other commodities are tokenized to offer fractional exposure without physical custody. Paxos Gold (PAXG) and Tether Gold (XAUT) are the most mature examples, with each token backed by one troy ounce of gold stored in audited vaults.
Commodity tokenization solves two historical problems: custody and storage costs, and the difficulty of fractionalization (you cannot buy half a gold bar in traditional markets).
Art and collectibles
Masterworks and Maecenas have tokenized works by Banksy, Basquiat, and Warhol, enabling fractional investment in high-value art. The typical model: an SPV acquires the work, issues tokens representing shares, and when the piece sells, profits are distributed to holders.
The advantage for artists: automated royalty percentages via smart contract on every secondary resale — something impossible in the traditional art market.
Private equity and investment funds
Franklin Templeton manages its tokenized money market fund (FOBXX) on the Stellar and Polygon networks, with over $400 million AUM. KKR tokenized a stake in its Health Care Strategic Growth Fund through Securitize.
Tokenization allows funds to reduce minimum investment tickets (from $250,000 to $10,000 or less) and offer secondary liquidity for assets typically locked for 7-10 years.
Intellectual property and royalties
Patents, music rights, and software licenses are tokenized to create fractional income streams. Royal.io enables fans to purchase tokens representing song royalties, receiving automatic payments each time the song is streamed.
Carbon credits and ESG assets
Carbon credit tokenization provides traceability and prevents double counting, one of the biggest problems in the voluntary carbon market. Toucan Protocol and KlimaDAO have tokenized millions of tonnes of CO2 equivalent. See our article on ESG tokenization and carbon credits for more details.
Benefits of asset tokenization
Greater liquidity
This is the most cited and most transformative benefit. Illiquid assets (real estate, art, private equity) represent over 60% of global wealth, but they are trapped in sales cycles lasting months or years. Tokenization enables 24/7 trading on secondary markets with instant settlement.
Fractionalization and democratization
The barrier to entry for premium asset classes drops dramatically. An investor with $500 can gain exposure to an office building in Madrid, a Basquiat painting, and a private equity fund — unthinkable five years ago.
Transparency and auditability
Every transaction, rent distribution, and ownership change is recorded immutably on the blockchain. Investors can verify in real time who owns what, how much has been distributed, and the complete history of the asset.
Automated compliance
With standards like ERC-3643, regulatory restrictions (KYC, AML, investor limits by jurisdiction, lock-up periods) are encoded in the smart contract. Compliance does not depend on a human team manually reviewing each transfer; it executes automatically on every transaction.
Reduced intermediaries and costs
The traditional value chain for a securities issuance involves the issuer, placement bank, central securities depository, brokers, custodians, and clearinghouses. Tokenization compresses this chain: the smart contract simultaneously acts as issuer, registry, and settlement mechanism. McKinsey estimates that tokenization can reduce issuance and administration costs by 40% to 65%.
Global interoperability
A token issued on Ethereum can be custodied by an investor in Singapore, traded on a Swiss market, and settled in seconds, without correspondent banking, manual currency conversion, or reconciliation processes between depositories.
Technical standards for tokenization
The choice of technical standard is not purely a technical decision: it determines the regulatory capabilities, interoperability, and institutional adoption of the token.
ERC-20: the base standard
ERC-20 defines the basic interface for fungible tokens on Ethereum: transfer, approve, balanceOf. It is simple, widely supported, and the foundation upon which other standards are built. However, it lacks any transfer control or identity verification mechanism, making it unsuitable for regulated security tokens.
ERC-1400: Security Token Standard
Introduced in 2018, ERC-1400 adds partitions (a token can have different tranches with different rights), transfer restrictions, and controlled issuance functions. Polymath was its main promoter, but implementation complexity and the lack of an integrated identity verification ecosystem limited its adoption.
ERC-3643: the winning standard
ERC-3643, formalized as an EIP standard in 2023, is the de facto standard for institutional security tokens. Its differentiating features:
- ONCHAINID: on-chain identity system that verifies investor eligibility without revealing personal data (zero-knowledge compatible)
- Modular compliance: transfer rules configurable by jurisdiction, investor type, and asset class
- Token recovery: recovery functions for lost key scenarios or court orders
- Selective freeze: ability to freeze individual tokens or pause the entire contract
Over 200 issuances have used ERC-3643 across real estate, private equity, corporate debt, and regulated funds. It is the standard that the European industry has adopted and the one we recommend for new issuances.
ERC-1155: multi-token
ERC-1155 allows managing fungible and non-fungible tokens within a single contract. It is useful when a project needs to represent different asset classes (ordinary + preferred shares, for example) without deploying multiple contracts.
Asset tokenization regulation
MiCA: the European framework
The Markets in Crypto-Assets Regulation (MiCA) became fully effective in December 2024. It is the first comprehensive legislation worldwide regulating the issuance, public offering, and provision of crypto-asset services across the EU.
For tokenization, MiCA establishes:
- Asset-Referenced Tokens (ART): tokens that maintain stable value by referencing a basket of assets. They require authorization as a credit institution or investment firm, 1:1 asset reserves, and periodic audits.
- E-Money Tokens (EMT): stablecoins referenced to a fiat currency. Requirements similar to existing electronic money institutions.
- Utility tokens: exempt from most requirements if they do not qualify as ART or EMT.
- Security tokens: MiCA explicitly excludes financial instruments from its scope, referring them to MiFID II and the DLT Pilot Regime.
DLT pilot regime
Regulation (EU) 2022/858, known as the DLT Pilot Regime, allows DLT-based Market Infrastructures to operate under an experimental supervised regime. This includes:
- DLT MTF: multilateral trading facilities based on blockchain
- DLT Settlement System: settlement systems using blockchain instead of traditional central securities depositories
EU regulatory sandboxes
Several EU member states have launched regulatory sandboxes for tokenization projects. Spain's CNMV operates a sandbox jointly with the Bank of Spain, and companies like Reental and Brickken have used it to launch real estate tokenization platforms under supervision.
US regulation
In the United States, the SEC applies the Howey Test to determine whether a token is a security. Most asset tokens classify as securities and must be registered or qualify for an exemption (Regulation D for accredited investors, Regulation A+ for limited public offerings, Regulation S for non-US investors).
Latin American regulation
Regulation varies significantly by country:
- Mexico: the 2018 Fintech Law regulates virtual assets but lacks a specific framework for RWA tokenization
- Colombia: the Financial Superintendency allows a regulatory sandbox for blockchain-based models
- Brazil: the central bank has advanced its CBDC (Drex) with integrated asset tokenization capabilities
- Argentina: no specific regulation, but growing activity in real estate tokenization
Key platforms and providers
Issuance platforms
| Platform | Specialization | Standard | Jurisdiction |
|---|---|---|---|
| Securitize | Private equity, regulated funds | ERC-3643 | US, EU |
| Tokeny Solutions | Institutional issuance, compliance | ERC-3643 | Luxembourg |
| Brickken | Asset tokenization for companies | ERC-20/ERC-3643 | Spain |
| Reental | Residential real estate | Custom ERC-20 | Spain |
| Polymath | Security tokens | ERC-1400 / Polymesh | Canada |
| Fireblocks | Custody + tokenization | Multi-standard | Global |
Most used blockchains for RWA
Ethereum remains the dominant network for institutional tokenization due to its liquidity, mature smart contract ecosystem, and ERC-3643 adoption. However, gas costs have driven migration toward L2s.
Polygon is the second most-used network for RWA, with minimal gas costs and full ERC-3643 compatibility. Franklin Templeton operates its tokenized fund on Polygon.
Avalanche has launched Evergreen Subnets specifically for financial institutions that need permissioned networks with public network interoperability.
Stellar is used by Franklin Templeton and some tokenized remittance issuers for its efficiency and low costs.
The future of asset tokenization
Convergence with DeFi
The intersection between RWA tokenization and DeFi is creating new paradigms. MakerDAO has integrated RWA as collateral in its protocol, accepting tokenized US Treasury bonds as backing for DAI. Ondo Finance and Centrifuge connect real-world assets to DeFi liquidity pools.
This convergence enables traditionally illiquid assets to generate yield in DeFi protocols, while giving protocols access to higher-quality collateral.
Cross-chain interoperability
The future of tokenization requires that a token issued on Ethereum can be settled on Polygon, custodied on an Avalanche subnet, and traded on a Stellar market. All seamlessly. Protocols like Chainlink CCIP and LayerZero are building this interoperability infrastructure.
Bank deposit tokenization
JPMorgan (Onyx), Citi (Citi Token Services), and HSBC (Orion) are developing bank deposit tokenization platforms that enable instant settlement between institutions. This could be more transformative than alternative asset tokenization, as it directly impacts the core of the financial system.
CBDCs and tokenization
Central bank digital currencies (CBDCs) will provide the native payment infrastructure for tokenized asset settlement. The digital euro, expected for 2027-2028, will allow the purchase of a real estate token to be settled in programmable central bank money, eliminating counterparty risk on the cash leg of the transaction.
AI and tokenization
The combination of AI and tokenization opens new possibilities: automated asset valuation, secondary market liquidity prediction, real-time fraud detection, and RWA portfolio optimization. AI agents will be able to execute investment strategies that combine tokenized assets across different classes and jurisdictions.
How to get started with asset tokenization
If you are considering tokenizing an asset or launching a tokenization platform, here are the initial steps:
Define the use case: do not tokenize for tokenization's sake. Identify an illiquid asset with predictable cash flows and a clear potential investor base.
Choose the legal structure: SPV, collective investment fund, or direct issuance depending on your jurisdiction. In Europe, consult a lawyer specializing in MiCA.
Select the technical standard: for security tokens in Europe, ERC-3643 is the recommended option. For utility tokens or NFTs, ERC-20 or ERC-721 may suffice.
Choose the blockchain: Ethereum for maximum institutional legitimacy, Polygon for optimized costs, or a permissioned network if your regulator requires it.
Select a technology provider: platforms like Securitize, Tokeny, or Brickken offer issuance infrastructure, compliance, and token lifecycle management.
Consult with experts: tokenization is a multidisciplinary process requiring legal, technical, and financial knowledge. At Beltsys Labs we offer specialized blockchain consulting and tokenization platform development tailored to your use case.
Contact our team to evaluate whether tokenization is viable for your asset or project.
Keep exploring
If you want to dive deeper into topics related to asset tokenization, these articles will help:
- What is blockchain? Complete guide 2026: the technological foundation of tokenization
- Real estate tokenization: complete guide: the most advanced vertical in RWA tokenization
- ERC-3643 standard: the legal solution for RWA tokenization: the technical standard we recommend
- MiCA regulation: guide for businesses: everything about the European regulatory framework
- What is DeFi? Complete guide: the convergence between DeFi and tokenization
Frequently asked questions about asset tokenization
What is asset tokenization in simple terms?
It is the process of representing a real-world asset (a property, an artwork, a bond) as digital tokens on a blockchain. Each token represents a fraction of the asset and can be bought, sold, or transferred programmatically, 24 hours a day, 7 days a week.
Is asset tokenization legal in Europe?
Yes, asset tokenization is legal across the EU under the MiCA regulatory framework (for crypto-assets) and the DLT Pilot Regime (for tokenized financial instruments). National competent authorities supervise these activities and several member states operate regulatory sandboxes for innovative projects.
What is the difference between a security token and a utility token?
A security token represents economic rights over an asset (dividends, rents, capital gains) and is regulated as a financial instrument. A utility token provides access to a service or platform, without economic rights over an underlying asset. The classification determines the issuer's regulatory obligations.
How much does it cost to tokenize an asset?
Costs vary by complexity. A basic issuance can cost between EUR 15,000 and EUR 50,000 (legal structuring + technical development + audit). Complex institutional issuances with multi-jurisdictional compliance can exceed EUR 200,000. Blockchain gas costs are additional but have decreased significantly with L2s like Polygon.
Which standard should I use to tokenize a regulated asset?
For security tokens in Europe, we recommend ERC-3643 for its native integration of regulatory compliance (KYC/AML), on-chain identity verification (ONCHAINID), and institutional adoption. For other use cases, evaluate ERC-1400 (partitions) or ERC-20 (simplicity) based on your needs.
Can I tokenize my real estate property?
Yes, but the process requires creating a legal structure (typically an SPV) that owns the property. The tokens represent shares in the SPV, not direct property ownership. You will need specialized legal advice and an authorized platform for issuance.
Which blockchain is best for asset tokenization?
Ethereum is the most widely used network for institutional tokenization due to its maturity and ERC-3643 adoption. Polygon offers significantly lower gas costs while maintaining full compatibility. For institutional privacy requirements, Avalanche Subnets or permissioned networks may be more suitable.
How do I generate liquidity for my tokens after issuance?
Through regulated secondary markets (tZERO, INX, Securitize Markets), DeFi protocol liquidity pools (for compatible tokens), or market-making agreements with specialized providers. Liquidity is the biggest post-issuance challenge and should be planned from the token design stage.
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