Traditional financial markets won’t survive without RWA tokenization

Opinion by: Abdul Rafay Gadit, co-founder of ZIGChain

America’s tariff regime has apparently fueled a global trade war, forcing investors to explore stable, yield-generating alternatives. A closer look reveals that illiquidity, opacity and scalability challenges have plagued global financial markets for long. They weren’t in great shape anyway, trade war or no trade war.

Tokenized real-world assets (RWAs) have risen to this occasion — thankfully. For one, they ensure predictable yields, providing a haven for investors amid uncertain market conditions and unproductive volatility. 

Above all, though, RWAs are a lifeboat for legacy finance, as they enhance market liquidity, bring transparency to opaque markets, and make finance more democratic. Traditional financial markets need to integrate — not resist — RWAs to stay relevant in the coming decade. 

RWAs to the rescue

In legacy finance, capital’s “computability” occurs through slow, expensive and unreliable intermediaries like banks. For example, these entities are primarily unable to rebalance portfolios quickly. 

This limits market scope, and consumers bear significant losses. There are persistent trust issues across the board, while fund managers face immense administrative burdens in handling clients. The bottom line: Everyone suffers, except the value-sucking go-betweens. 

That’s a big reason fundraising in private equity, a key pillar of global financial markets, declined 24% in 2024, per McKinsey’s report. Likewise, as the SIFMA 2025 Capital Markets Outlook revealed, US equity issuance has decreased by 0.6% annually since 2020. Initial public offerings have been down 8.5% during this period. 

RWAs fix these. They make portfolio management more straightforward and seamless, with scalable capital deployment even in turbulent markets. 

Tokenization automates verifiable transactions, enabling precise, deterministic, trustless economies — turning the status quo on its head. It also provides investors with low-risk, low-cost and rapid access to existing and emerging global financial markets. 

Recent: 5 ways real-world asset tokenization is transforming TradFi

No wonder onchain RWAs increased 85% to over $15 billion in 2024. And this trend still has momentum. RWAs are poised to remain a top investment category in crypto.

RWAs reached a new all-time high recently, surpassing $17 billion, with over 82,000 asset holders. Notably, tokenized private credit is the largest asset in the RWA industry, with over $11 billion in valuation. 

It’s clear that investors chose RWAs in the face of a $10-billion liquidation and general, persistent market volatility. Moreover, this asset class is making private credit great again, laying the foundation for future financial markets.

“Smart money” bets on RWAs 

JPMorgan, BlackRock, UBS, Citi, Goldman Sachs — all the big names in legacy finance have moved into RWAs. Capital inflows from such “smart money” entities helped onchain private credit grow 40% last year, while tokenized treasuries surged 179% overall.

All this could very well be routine diversification and capital expansion. But funds like Franklin Templeton’s Franklin Onchain US Government Money Fund (FOBXX) and BlackRock’s US dollar Institutional Digital Liquidity Fund (BUIDL) signal a more long-term motive. 

Initiatives like FOBXX and BUIDL are focused on transforming money markets through lower settlement times, easier liquidity access, better trading environments and other improvements. 

They leverage tokenization to introduce novel yield-generating opportunities in traditionally illiquid markets like the private credit sector. As data from PricewaterhouseCoopers suggests, this could be a $1.5-trillion disruption. S&P Global also believes private credit tokenization is the “new digital frontier” that solves liquidity and transparency issues.

RWAs are thus emerging as a viable, more lucrative alternative for institutional investors, who control nearly one-fourth of the $450-trillion legacy financial market. That’s a strong enough waking sign — plus there’s increasing demand from “retail” users (i.e., the remaining three-fourths of the pie).

Retail is the end-game for RWAs

Institutional adoption is excellent for building initial awareness around RWAs. Like it or not, their actions move the needle. In the long run, however, individual retail users stand to benefit most from RWAs. 

RWAs make capital markets accessible to grassroots investors, including unbanked populations. Fractional ownership, for instance, lets those with smaller capital holdings get exposure to high-ticket assets otherwise reserved for wealthy family offices and institutions.

Because of these benefits, retail users will choose RWAs over traditional, exclusive financial assets and markets. And now it’s a no-brainer for them, thanks to solutions like social investing platforms, which give users intuitive, hassle-free access to novel financial opportunities. 

Multiple reports from Mastercard to Tren Finance and VanEck showcase RWAs’ massive growth potential. It could be anywhere between $50 billion and $30 trillion over the next four to five years. 

Widespread retail adoption will drive this growth, and unless traditional markets adapt or adopt RWAs, they will lose the vast majority of their users. With institutional and retail capital moving into this emerging sector, it’s genuinely do-or-die for legacy systems.

Robust tools and platforms that leverage RWAs to bridge the gap between traditional and emerging financial markets are available now. That makes it a question of intent and priority more than anything else. 

Catch up or become obsolete — that’s the message. It’s the wartime arc, as it has been long due. The best part is that legacy assets coming onchain and markets leveraging RWAs will be a win-win for issuers, institutions and retail users. That’s what the world needs from a financial standpoint. It’s worth all the effort.

Opinion by: Abdul Rafay Gadit, co-founder of ZIGChain.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.