Tokenized assets are transforming institutional investing by digitizing ownership of physical assets like real estate, bonds, and private equity on blockchain networks. This shift allows for fractional ownership, faster settlements, and improved liquidity. Key drivers include:
- Adoption Growth: Institutions currently allocate under 10% of assets to digital investments, expected to double by 2028. By 2026, 76% of firms plan to invest in tokenized assets.
- Market Expansion: Tokenized real estate is valued at $20 billion in 2025, while tokenized treasuries reached $7.4 billion with 80% annual growth.
- Efficiency Gains: Blockchain reduces settlement times from days to minutes and lowers costs by automating processes with smart contracts.
- Institutional Examples: BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) grew from $500 million in 2024 to $2.3 billion by August 2025. Santander issued a $20 million blockchain bond, cutting issuance time significantly.
While regulatory uncertainties and technical challenges like market fragmentation persist, the potential for tokenized assets to reshape portfolio strategies is undeniable. Institutions are leveraging this approach to access previously illiquid assets, diversify portfolios, and streamline operations.
Current Adoption of Tokenized Assets by Institutions
Adoption Statistics and Market Size
Institutional interest in tokenized assets is no longer theoretical – it’s measurable and expanding. As of now, institutions hold just under 10% of their total assets under management in digital assets, with projections suggesting this will double by 2028. Looking further ahead, by 2030, over half of surveyed institutions anticipate that 10% to 24% of all investments will involve digital assets or tokenized instruments.
The momentum is underscored by the 2025 EY survey, which found that 76% of institutional firms plan to invest in tokenized assets by 2026. Additionally, more than 75% of institutions aim to increase their digital asset allocations in 2025, with 59% specifically focusing on tokenized instruments. The 2025 Broadridge Tokenization Survey, which gathered insights from 300 financial institutions, further confirms that tokenization is already being implemented across public market instruments. These trends are not just theoretical – they are backed by real-world examples from leading financial institutions.
Examples of Institutional Participation
Some of the biggest names in finance are making significant moves in tokenization. For instance, BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL) grew from $500 million at its 2024 launch to an impressive $2.3 billion in assets under management by August 2025. Santander also made waves by issuing a $20 million blockchain bond, slashing the traditional issuance timeline from weeks to mere days with the help of automated smart contracts. Meanwhile, Hamilton Lane tokenized a private equity fund, dramatically lowering the minimum investment threshold from $5 million to just $20,000, thereby broadening access to a wider pool of investors.
Asset Classes Leading Adoption
The adoption of tokenized assets varies across asset classes, with each offering distinct benefits. Private equity is at the forefront, with 60% of institutional investors expressing interest in tokenized investments. Tokenization in this space allows for fractional ownership and secondary market trading. For example, a $50 million portfolio can be divided into smaller shares as low as $1,000, with dividend distributions managed automatically.
Real estate is another key area, drawing interest from 53% of institutions and projected to reach a market value of roughly $20 billion by 2025. Tokenization transforms traditionally illiquid properties into easily tradable tokens, enabling ownership transfers in minutes rather than months – all while retaining rental income and property appreciation benefits.
Private credit is also gaining traction, capturing 45% of institutional demand. Tokenization introduces liquidity to a market that typically lacks secondary trading options, giving institutions the flexibility to adjust credit exposure as market conditions shift.
Tokenized treasuries are experiencing rapid growth, reaching $7.4 billion in 2025 with an annual growth rate of 80%. Similarly, dollar-backed stablecoins achieved a market capitalization of approximately $250 billion by mid-2025. These instruments offer near-instant settlement compared to the traditional T+2 cycles, reducing counterparty risk and freeing up capital for other uses.
Different types of institutions are embracing tokenization at varying rates. Asset managers, family offices, and large financial firms are leading the charge, while smaller or more conservative institutions remain cautious. What’s clear is that tokenization has evolved from being an experimental concept to becoming a strategic element of mainstream institutional portfolios.
Benefits of Tokenized Assets for Institutional Portfolios
Lower Costs and Faster Settlements
Traditional financial systems often rely on T+2 settlement cycles, which can tie up capital and increase counterparty risk. Tokenized assets, on the other hand, settle almost instantly. This near real-time settlement reduces both risk and the amount of capital locked in the process.
Tokenization also streamlines processes like fund administration and investor onboarding, driving down operational costs. Take the example of Goldman Sachs and BNY Mellon: they’ve partnered with BlackRock and Fidelity to tokenize money-market funds, aiming to achieve quicker settlements and lower administrative expenses. Santander has also demonstrated how this technology works in practice. By issuing a $20 million bond on a blockchain, they slashed a process that typically takes weeks down to days. The blockchain automatically enforced interest payments and compliance requirements, further reducing reliance on intermediaries. Fewer middlemen mean fewer costs and fewer potential points of failure, making the process more efficient overall.
These efficiencies not only cut costs but also create opportunities for greater liquidity across various asset classes.
Improved Liquidity for Illiquid Assets
Tokenization is a game-changer for traditionally illiquid assets, offering fractional ownership and enabling secondary market trading. For instance, Hamilton Lane lowered the minimum investment for its private equity fund from $5 million to just $20,000, making these investments far more accessible and liquid. Similarly, a $50 million private equity portfolio can be tokenized into smaller units, allowing ownership stakes as low as $1,000. Smart contracts can then automate dividend distributions, while digital exchanges provide platforms for secondary trading.
Other asset classes like private credit and real estate are also experiencing liquidity improvements. Private credit, which made up 61% of tokenized assets as of April 2025, now offers flexible exit strategies – a stark contrast to the limited trading options traditionally available in this space. Real estate tokenization has surged as well, reaching a market value of roughly $20 billion. Meanwhile, the broader Real-World Assets (RWA) tokenization market hit $24 billion in 2025, reflecting a remarkable 308% growth over three years. This rapid expansion highlights how increased liquidity supports more dynamic portfolio management and better risk mitigation strategies for institutional investors.
Transparency and Security
Beyond liquidity and cost benefits, tokenization offers unmatched transparency and security. Blockchain technology ensures that every transaction and ownership change is recorded on an immutable ledger, eliminating the need for extensive manual reconciliations. Unlike centralized systems – which can be vulnerable to fraud and single points of failure – blockchain distributes data across a network, making unauthorized changes far more difficult.
Smart contracts add another layer of security by automatically enforcing compliance and interest payment schedules, reducing the likelihood of human error. This automation ensures consistency and reliability. Additionally, blockchain’s built-in audit trail simplifies regulatory compliance, potentially lowering costs and speeding up approval processes. Real-time visibility into ownership and transaction histories also empowers institutions to make better-informed decisions, strengthening their portfolio management strategies.
While tokenization isn’t without its challenges – regulatory uncertainties and technical hurdles remain – it significantly enhances the transparency and security framework compared to traditional systems that rely on multiple intermediaries.
Tokenization: What’s Working (and What Isn’t) for Institutions | EBC11
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Challenges and Regulatory Considerations
Tokenized assets bring plenty of potential, but for institutions, the road to adoption is far from smooth. From technical hurdles to murky regulatory waters and fragmented markets, the challenges are significant. Let’s break down these barriers and why they matter for institutions looking to incorporate tokenization into their strategies.
Integration with Existing Systems
One of the first obstacles institutions face is figuring out how to integrate tokenized assets into their existing systems. Traditional financial systems are built around centralized databases, T+2 settlement cycles, and processes that rely heavily on intermediaries. Tokenized assets, on the other hand, operate on blockchain technology, settling in real time. This mismatch creates a technical headache.
To make it work, many institutions end up running parallel systems, which complicates operations and requires additional training for staff. Interoperability between blockchain networks and traditional settlement systems is still in its infancy, forcing institutions to either adopt fragmented solutions or wait for standardized bridges to emerge.
Security and compliance add another layer of complexity. Institutions need to ensure that tokenized platforms meet their stringent audit and compliance standards – something many newer platforms haven’t yet achieved. This often leaves institutions stuck between two less-than-ideal options: compromising on established risk protocols or delaying adoption until the technology matures.
Custody also presents a challenge. Traditional custody systems come with well-defined legal frameworks, insurance protections, and regulatory oversight. Tokenized custody, however, operates in a less mature ecosystem, with inconsistencies in security, insurance, and regulatory standards. While self-custody eliminates counterparty risk, it introduces operational risks, especially if private keys are lost or compromised. Third-party custody, meanwhile, reintroduces counterparty risk if the provider fails.
These technical hurdles naturally lead to even bigger concerns around regulation.
Regulatory Uncertainty and Compliance
Regulatory ambiguity is one of the biggest roadblocks to institutional adoption of tokenized assets. As of 2025, there’s no globally unified regulatory framework for these assets. Instead, institutions must navigate a confusing mix of national and regional rules, making cross-border participation a logistical nightmare.
The International Organization of Securities Commissions (IOSCO) has flagged critical gaps, such as how ownership is recorded, when settlement is considered final, and how blockchains interact with one another. This raises tough questions: Do tokenized assets count as securities? How do existing securities laws apply? And how is ownership legally secured on a blockchain?
Compliance teams face a daunting task. Anti-money laundering (AML), know-your-customer (KYC) requirements, and tax rules vary widely across jurisdictions. And then there’s the issue of applying rules against market manipulation and insider trading to tokenized markets, which operate differently from traditional exchanges.
Another sticking point is settlement finality. In traditional finance, there are clear legal frameworks defining when a transaction is final and irreversible. On blockchain networks, however, this remains a gray area. Institutions need absolute certainty that once they acquire tokenized assets, their ownership is legally secure, regardless of technical glitches, regulatory interventions, or disputes.
Some progress is being made. IOSCO is analyzing tokenization’s impact on market integrity and investor protection, and some jurisdictions are experimenting with regulatory sandboxes to balance innovation with investor safeguards. But without global coordination, institutions operating across multiple regions face a patchwork of rules, adding to the complexity.
This cautious regulatory environment is reflected in adoption trends. While 76% of firms plan to invest in tokenized assets by 2026, only 1% of institutional investors expect the majority of their investments to be in digital or tokenized assets by 2030. Most (52%) anticipate that only 10% to 24% of their portfolios will include tokenized investments. This cautious outlook highlights the need for clearer regulations before tokenization can truly take off.
Beyond regulation, market fragmentation and interoperability issues further complicate adoption.
Market Fragmentation and Interoperability
The tokenized asset market is fragmented, and that fragmentation is a major hurdle. Different blockchain networks – like Ethereum, Solana, and Polygon – host tokenized assets, but they don’t play well together. This forces institutions to either spread their operations across multiple platforms or commit to just one ecosystem, limiting flexibility.
Tokenized treasury markets are a prime example. Multiple platforms offer similar products, but without standardized interfaces or settlement mechanisms. Take BUIDL’s growth, for instance – it shows how relying on a single blockchain can limit cross-network accessibility. As a result, institutions struggle to aggregate positions across platforms or execute complex strategies that span multiple ecosystems.
The lack of standardization extends to token formats, smart contracts, and settlement protocols, creating inefficiencies and increasing counterparty risks. Custody solutions, settlement finality mechanisms, and compliance frameworks vary widely, further complicating matters. Pricing transparency also takes a hit, as the same asset can trade at different prices across platforms due to fragmented liquidity and differing fee structures.
This fragmentation is especially problematic in private asset tokenization. Institutions expect concentrated liquidity but instead find dispersed markets, which undercuts the efficiency gains tokenization promises. For large institutions managing trillions of dollars, such inefficiencies are a dealbreaker. They need the same level of operational efficiency and risk management they’re accustomed to in traditional systems.
Until the industry develops standardized protocols for interoperability, custody, and settlement, scaling tokenized asset allocations will remain an uphill battle. Currently, institutions allocate less than 10% of their assets to digital investments, though this is expected to more than double in the next three years. Even so, growth will likely be limited until these fragmentation and regulatory issues are resolved, giving institutions the confidence to commit more capital.
Future Outlook and Portfolio Implications
Tokenization is changing the way institutions think about building portfolios, allocating assets, and crafting investment strategies. As the technology evolves and regulations become more defined, tokenized assets are no longer just niche options – they’re becoming central components of investment portfolios.
How Tokenization Changes Portfolio Strategies
Tokenization is opening up access to asset classes that were previously out of reach for most investors. Take Hamilton Lane, for example. By lowering their minimum investment requirements from $5 million to just $20,000, they’ve shown how fractional ownership can help institutions diversify without needing massive capital commitments. This shift allows portfolio managers to spread investments across smaller allocations, with smart contracts handling tasks like distributing dividends automatically.
Another game-changer? Liquidity. Assets that were once considered illiquid can now be traded on secondary markets and settled almost instantly. This not only reduces counterparty risk but also frees up capital for other opportunities. Tokenization is also paving the way for investments in new asset classes, such as tokenized renewable energy credits, which align with Environmental, Social, and Governance (ESG) goals. These developments indicate a major shift in how portfolios are constructed, setting the stage for the market’s growth and adoption trends discussed next.
Adoption Projections for 2025–2030
The market for tokenized assets is growing fast. Recent forecasts estimate that by 2030, the tokenized asset market could reach between $2 trillion and $4 trillion, with institutional digital allocations expected to more than double in the next three years. Some projections are even more optimistic, suggesting the market could hit $30 trillion, with real-world asset (RWA) tokenization climbing from $0.6 trillion in 2025 to $18.9 trillion by 2033 – a staggering annual growth rate of around 53%.
Currently, institutional investors hold less than 10% of their assets in digital tokens. By 2030, however, over half of surveyed investors believe that 10% to 24% of all investments will involve digital assets or tokenized instruments. Private equity, private credit, and real estate are expected to see the highest demand, with predicted allocations of approximately 60%, 45%, and 53%, respectively.
Traditional financial institutions are also stepping into the tokenization space. BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), launched in 2024, is a prime example. The fund raised over $500 million within just a few months and grew to more than $2.3 billion in assets under management by August 2025. Meanwhile, firms like Goldman Sachs and BNY Mellon are working on improving settlement efficiency for tokenized money-market funds. However, only 1% of institutions anticipate that digital assets will dominate investments by 2030, as many remain cautious, waiting for clearer regulations and more mature infrastructure.
How BeyondOTC Supports Institutional Adoption
With these market trends and portfolio shifts in mind, BeyondOTC is helping institutions tap into the potential of tokenized assets. By addressing operational and regulatory hurdles, BeyondOTC’s services enhance the liquidity and efficiency benefits that tokenization offers.
BeyondOTC connects institutions to tokenized opportunities through a range of services, including fundraising advisory, OTC trading solutions, legal consultancy, and market insights. These offerings streamline capital formation, enable secure high-volume transactions, and link institutions to a global network of key industry players spanning over 50 countries. This network includes centralized exchanges, decentralized exchanges, launchpads, and market makers.
Their legal consultancy pairs institutions with blockchain and cryptocurrency law experts, while their market insights – delivered via real-time data and tailored research reports – help institutions seamlessly integrate tokenized assets into their broader investment strategies.
As tokenization continues to reshape institutional portfolios over the next few years, agencies like BeyondOTC are playing a critical role in guiding institutions through the complexities of this emerging asset class and helping them fully realize its potential.
Conclusion
The rapid growth in adoption metrics highlights the accelerating momentum within the industry. Institutions are gearing up to more than double their digital asset allocations over the next three years, with ambitious investment plans already coming into focus.
This surge in adoption is fueled by clear advantages. Tokenization brings liquidity to traditionally illiquid markets, facilitates real-time settlements that cut down counterparty risks, and broadens access to investment opportunities that were once exclusive to the wealthy. Real-world examples have already showcased these transformative benefits.
Operationally, tokenization is reshaping portfolio strategies. Fractional ownership enables exposure to assets like private equity, real estate, and private credit with far less capital, while smart contracts streamline processes like dividend distributions and interest payments, slashing administrative costs and boosting efficiency. Additionally, tokenization creates secondary markets for assets that were previously illiquid, offering more flexibility for investors seeking exit opportunities.
Still, challenges remain. Regulatory uncertainty and technical hurdles, such as market fragmentation and the integration of blockchain with older systems, need to be addressed. Institutions must adopt a thoughtful approach to tokenization, focusing on asset classes with the most potential benefits while navigating compliance in this evolving landscape.
Strategic partnerships will play a key role in bridging the gap between traditional finance and blockchain technology. Companies like BeyondOTC have already facilitated over $250 million in Bitcoin transactions and more than $30 million in OTC altcoin trades, providing services such as fundraising advisory, OTC trading solutions, legal guidance, and market insights.
Looking to the future, tokenized assets are projected to reach a staggering value of $10 trillion to $16 trillion by 2030. With private equity, private credit, and real estate driving institutional interest, tokenization is set to redefine how assets are owned, traded, and managed. Institutions that take a strategic, informed approach and collaborate with experienced experts will be best positioned to thrive in this transformative era.
FAQs
What challenges do institutions face when incorporating tokenized assets into their portfolios?
Integrating tokenized assets into institutional portfolios comes with its fair share of challenges. One major hurdle is regulatory uncertainty. Rules governing tokenized assets differ significantly between regions, creating a maze of compliance requirements that can be tough to navigate. On top of that, many institutions must overhaul outdated systems to effectively manage blockchain-based assets, which adds a layer of technological difficulty.
Liquidity concerns also play a role, as some tokenized markets may not have the depth to support large-scale institutional trades. Then there’s the matter of risk management – volatility and cybersecurity risks demand careful strategies to ensure portfolio stability. Even with these challenges, the appeal of tokenized assets lies in their potential to bring new opportunities for diversification and innovation to institutional investors.
How does tokenization enhance liquidity and make assets like private equity and real estate more accessible?
Tokenization takes assets that are usually tough to trade, like private equity or real estate, and converts them into digital tokens. These tokens represent fractional ownership, making it possible for more people to invest. By splitting assets into smaller, more manageable pieces, tokenization opens the door for a wider pool of investors, lowering the hurdles that often keep people out.
On top of that, tokenization boosts liquidity. Transactions happen faster and more efficiently on digital platforms, letting investors buy, sell, or trade their shares without the drawn-out procedures that these kinds of assets usually require.
What regulatory challenges do institutions face when investing in tokenized assets, and how are these being addressed?
Institutions venturing into tokenized assets frequently encounter regulatory obstacles tied to compliance, transparency, and differing laws across jurisdictions. These challenges arise from the ever-changing rules surrounding blockchain technology and digital assets.
In response, regulatory authorities are striving to create more defined guidelines, while institutions are partnering with legal professionals to stay within the bounds of the law. Many companies are also implementing thorough due diligence practices and teaming up with firms that specialize in blockchain law to manage these challenges effectively.
