Opinion by: Abdul Rafay Gadit, co-founder of ZIGChain
The current tariff strategies in the United States have seemingly ignited a worldwide trade conflict, prompting investors to seek out stable, yield-generating alternatives. An in-depth examination shows that issues such as illiquidity, lack of transparency, and scalability have long hindered global financial markets. These markets were already struggling, regardless of the trade tensions.
Fortunately, tokenized real-world assets (RWAs) have risen to meet this challenge. They provide reliable yields and create a safe harbor for investors during uncertain market periods marked by volatility.
More importantly, RWAs serve as a lifebuoy for traditional finance, enhancing market liquidity, introducing transparency to previously obscure markets, and democratizing access to financial opportunities. To remain relevant in the next decade, traditional financial markets must embrace — rather than resist — RWAs.
RWAs to the rescue
In traditional finance, the “computability” of capital relies on slow, costly, and often unreliable intermediaries, such as banks. These institutions usually struggle to adjust portfolios swiftly.
This situation not only restricts market potential but also causes substantial losses for consumers. Ongoing trust issues complicate matters, with fund managers burdened by significant administrative challenges in client management. Ultimately, everyone bears the repercussions, except for the intermediaries that extract value.
This is a significant reason why fundraising in private equity, a core component of global financial markets, fell by 24% in 2024. Similarly, recent data reveal that US equity issuance has dropped by 0.6% each year since 2020, and initial public offerings have declined by 8.5% in that same timeframe.
RWAs can remedy these problems. They simplify portfolio management and allow for scalable capital deployment even during market turbulence.
Tokenization automates secure transactions, facilitating precise and trustless economic systems that fundamentally challenge the current norms. Furthermore, it grants investors low-risk, low-cost, and swift access to both established and emerging global financial markets.
Recent: 5 ways real-world asset tokenization is transforming TradFi
It’s no surprise that onchain RWAs surged by 85%, exceeding $15 billion in 2024. This trend shows no signs of slowing. RWAs are set to continue as a leading investment category within the crypto space.
Recently, RWAs achieved a record high, eclipsing $17 billion, with over 82,000 asset holders. Noteworthy is that tokenized private credit represents the largest segment in the RWA sector, boasting a valuation exceeding $11 billion.
Clearly, investors are gravitating towards RWAs amidst a backdrop of $10 billion liquidations and ongoing market volatility. This asset class is revitalizing private credit and setting the groundwork for future financial frameworks.
The “smart money” backs RWAs
This could simply be part of routine diversification and capital growth efforts. However, funds such as Franklin Templeton’s Franklin Onchain US Government Money Fund and BlackRock’s US Dollar Institutional Digital Liquidity Fund suggest a more strategic, long-term objective.
Initiatives like FOBXX and BUIDL aim to revolutionize money markets by reducing settlement times, improving liquidity access, enhancing trading environments, and introducing other advancements.
They leverage tokenization to create innovative opportunities for yield generation in typically illiquid markets, such as the private credit space. Research from PricewaterhouseCoopers indicates that this could drive a $1.5 trillion disruption. Moreover, S&P Global identifies private credit tokenization as the “new digital frontier” that addresses liquidity and transparency challenges.
Consequently, RWAs are emerging as a promising, more profitable alternative for institutional investors, who hold nearly one-quarter of the $450 trillion legacy financial market. This trend is a significant signal — compounded by increasing interest from retail users, who represent the majority of this market.
Retail is the final frontier for RWAs
Institutional adoption serves as a strong stepping stone for raising awareness about RWAs. Whether we like it or not, their influence is impactful. In the grand scheme, however, retail users stand to gain the most from RWAs.
RWAs open up capital markets to grassroots investors, including those who are unbanked. Fractional ownership, for instance, allows individuals with smaller capital bases the opportunity to invest in high-value assets typically reserved for affluent family offices and institutions.
Due to these advantages, retail users are likely to prefer RWAs over conventional financial assets and markets. With the emergence of social investing platforms, gaining access to novel financial opportunities has never been easier.
Numerous studies, from major players like Mastercard to Tren Finance and VanEck, underscore the significant growth potential of RWAs, estimating anywhere from $50 billion to as much as $30 trillion in the next four to five years.
Widespread adoption by retail investors will propel this growth, and traditional markets must adapt or incorporate RWAs into their structure, or risk losing a vast majority of their user base. With both institutional and retail capital flowing into this burgeoning sector, it’s a crucial moment for legacy systems.
Effective tools and platforms that utilize RWAs to bridge the divide between traditional and emerging financial markets are currently accessible. This leaves the focus on intent and priority over anything else.
Keep pace or fall behind — that’s the message. It’s a time of reckoning, and the long-overdue transformation is underway. The integration of legacy assets onto blockchain and the adoption of RWAs will benefit issuers, institutions, and retail users alike. It’s the transformation the financial landscape needs and is well worth the effort.
Opinion by: Abdul Rafay Gadit, co-founder of ZIGChain.
This article is for informational purposes only and should not be interpreted as legal or investment advice. The views and opinions expressed are solely those of the author and do not necessarily represent those of any affiliated entities.