Tokenisation of Real World Assets: How Blockchain Is Reshaping Finance
How real-world assets like real estate, bonds, and gold are being tokenised on blockchain, with three concrete platform examples.
Imagine holding digital tokens that grant you a share of rental income from a property halfway across the globe, or a token tied to interest payments on a country's debt. This is tokenisation, and it is steadily becoming a cornerstone of modern finance.
The digitisation of real-world assets (RWA) unlocks opportunities for more fluid exchanges and, above all, for democratising investment. But what about governance rights, fees, management, and regulation? Let's explore these questions through concrete examples, with a critical eye on both the promise and the pitfalls.
What Is Tokenisation and How Does It Work?
From Real-World Assets to Blockchain
A common example of tokenisation you might already use without realising is USDT, a cryptocurrency that turns U.S. dollars into digital tokens. But tokenisation goes far beyond currency. It involves converting various asset rights into digital tokens on a blockchain, encompassing Real World Assets (RWA) like real estate, art, start-up equity, bonds, and potentially much more.
Democratising Investment
By linking a token to a portion of an asset's rights, tokenisation delivers two key benefits. First, it democratises investment by making it possible to acquire shares in high-value assets incrementally. Buying a house to rent out may be unattainable for a household with modest income, but gradually purchasing tokens that represent fractional ownership, and earning a proportional share of the rent, becomes far more accessible.
The second advantage is the increase in liquidity and simplification of international transactions through blockchain and smart contracts. By lowering the barrier to entry, tokenisation opens traditionally rigid markets to broader participation and makes them significantly more fluid.
A Word of Caution
Despite its potential, tokenisation carries real challenges. The nuances of ownership and governance rights require precise regulation to align token ownership with actual asset possession. Regulatory complexity varies by jurisdiction, potentially increasing compliance costs. And blockchain security, scalability, and token volatility raise questions about the long-term stability of digital investments.
What Is the Difference Between Tokenisation and Cryptocurrencies?
Tokenisation and cryptocurrencies both live on the blockchain, but they serve distinct roles.
Cryptocurrencies like Bitcoin and Ethereum are decentralised digital currencies, primarily used as a medium of exchange or store of value. They operate independently of traditional monetary systems and are not backed by external assets; their value is intrinsic to the network.
Tokenisation converts rights to a real or intangible asset into a digital token. These tokens, often categorised as security tokens or utility tokens, represent a stake in a specific asset such as real estate or artwork. Their value is directly tied to the underlying asset, unlike a cryptocurrency whose value floats independently.
Tokens from tokenisation can be traded on cryptocurrency exchanges and decentralised finance (DeFi) platforms, just like cryptocurrencies. The difference lies in what backs them.
Tokenisation in Practice: Three Concrete Cases
Theory only goes so far. Tokenisation's real test is in the field, where platforms are already converting physical assets into tradeable tokens. Here are three cases that illustrate how different asset classes are being tokenised today.
Real Estate on the Blockchain: RealT
RealT (realt.co) is a pioneering real estate tokenisation platform launched in May 2019. The American company transforms real estate ownership rights into ERC-20 tokens called RealTokens on the Ethereum blockchain. Each token represents fractional ownership in a property, and holders earn rental income proportional to their share.
The minimum investment is the price of one token, typically between 150. Expected annual return hovers around 10%, excluding property appreciation. Payments arrive weekly in USDC, with automatic reinvestment available as an option. For liquidity, RealT uses Uniswap, a decentralised exchange where RealTokens can be traded without needing a direct counterpart.
One nuance worth understanding: owning 100% of a property's tokens does not equal traditional real estate ownership. Physical ownership is held by an LLC, one per property, and token holders own shares in that LLC. The LLC manages legal responsibilities and distributes rental income through RealT. Token ownership grants economic rights, but not the keys to the front door.
Green Bonds on Ethereum: SG Forge
In November 2023, SG Forge, a subsidiary of French bank Société Générale, issued the first digital green bond on the public Ethereum blockchain. Structured as a security token, it was fully subscribed by AXA Investment Managers and Generali Investments.
The bond, €10 million with a 3-year maturity, finances green projects aligned with Société Générale's Green Bond Principles: renewable energy, energy efficiency, and sustainable resource management. What makes this case stand out is the institutional credibility: a major European bank using a public blockchain for a regulated financial instrument.
Tokenised Gold: Aurus
Founded in 2018, Aurus (aurus.io) tokenises physical precious metals (gold, silver, and platinum) into tGOLD, tSILVER, and tPLATINUM tokens. Each token represents one gram of the corresponding metal, sourced from accredited refineries and stored by specialised partners. Token holders can redeem their digital assets for physical metal at any time, and the tokens trade on DeFi platforms like Uniswap and centralised exchanges such as CEX.io.
How closely do these tokens track the real thing? A snapshot from early 2024 comparing tGOLD on Uniswap to the spot gold price revealed two patterns. First, tGOLD had depreciated slightly against physical gold, with a gap of about $4 at the time. Second, while tGOLD followed gold's general trend, it exhibited significantly higher volatility, unsurprising given the enormous difference in traded volumes: roughly $10,000 daily for tGOLD versus $131 billion for physical gold.
Advantages, Risks, and the Road Ahead
The benefits of tokenisation converge around three points:
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Liquidity and democratisation — Traditionally illiquid assets become accessible and divisible. Investors with limited capital can participate in markets that were previously out of reach.
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Global access — Tokenisation removes geographic barriers. Cross-border transactions bypass the friction of traditional banking systems, opening investment opportunities to an international audience.
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Efficiency and transparency — Smart contracts automate transactions, reducing costs and intermediaries. Blockchain provides a transparent, traceable record of every transfer.
But these advantages come with real risks that both token creators and investors must navigate carefully.
Ensuring a clear match between token ownership and actual asset possession remains a legal grey area in many jurisdictions. Regulatory frameworks are still evolving, and compliance costs can be substantial. Blockchain security and scalability are ongoing technical challenges, and the enhanced liquidity that makes tokens attractive can also introduce price volatility disconnected from the underlying asset, as the tGOLD example illustrates.
Tokenisation is not a silver bullet. It is a powerful tool with genuine trade-offs, and the coming years will determine which asset classes and regulatory frameworks allow it to deliver on its promise.