Tokenized real-world assets have crossed $34 billion in total value, yet most remain trapped in a buy-and-hold model because regulated secondary markets where investors can actually sell them are still scarce. The infrastructure boom around tokenization has created issuance platforms and custody solutions, but the missing piece is the exit ramp. Without functioning order books and regulated exchanges, tokenized funds and securities behave more like illiquid private credit than the liquid investments institutions need.

What's Preventing Tokenized Assets From Becoming Truly Liquid?

The tokenization sector faces a paradox. Technology to create and settle tokenized assets on blockchain networks exists and works. The real barriers are not technical anymore, they are structural. Regulatory fragmentation across borders, lack of interoperable settlement standards, and the absence of licensed trading venues create a bottleneck that no amount of blockchain innovation can solve alone.

Franklin Templeton, which manages $1.78 trillion in assets, has been building tokenized investment products for years. Yet even a major asset manager with deep resources acknowledges the core challenge: "From a technology standpoint, the biggest challenge is probably ubiquity of standards with the product set," explained Chetan Karkhanis, who leads digital asset partnerships in Asia-Pacific for the firm. Beyond that, he noted, "The larger challenges are likely regulatory clarity across borders and really awareness, adoption and education".

The International Organization of Securities Commissions (IOSCO), which coordinates global securities regulators, identified in a November 2025 report that regulatory treatment, interoperability, settlement arrangements, and operational dependencies remain persistent barriers to wider tokenization adoption. Without common infrastructure connecting different blockchains and settlement systems, tokenized assets remain confined to individual platforms and jurisdictions.

How Are Regulated Exchanges Beginning to Fill the Gap?

A shift is underway. On July 22, 2026, 1exchange, a licensed exchange for tokenized real-world assets, listed uMINT, a tokenized version of a UBS money market fund built on Ethereum. This marks a meaningful step forward because it gives investors a regulated order book where they can buy and sell the token directly, rather than relying solely on redemption through the issuer or over-the-counter bilateral trades.

For asset managers and family offices operating under strict compliance frameworks, this infrastructure change alters the economics of holding tokenized positions. Without secondary markets, tokenized assets force investors into a model resembling private credit, where redemption requires waiting periods and manual processing. A functioning order book lets market participants price risk continuously, manage duration, and rebalance without friction.

The uMINT listing arrives as on-chain real-world assets surpass $20 billion in total value locked. This milestone coincides with other production-grade infrastructure developments, including Bullish's $4.2 billion acquisition of Equiniti and the first live tokenized Treasury settlement between Ondo and JPMorgan. These events share a common thread: the infrastructure around tokenized assets is shifting from proof-of-concept to production-grade systems.

Steps to Understanding the Tokenized Asset Liquidity Challenge

• Primary Issuance vs. Secondary Trading: Most tokenized assets today exist only in primary issuance, where investors buy directly from the issuer. Secondary trading venues with regulatory oversight remain scarce, forcing investors to treat tokenized positions as buy-and-hold instruments without transparent exit paths.
• Regulatory Jurisdiction Requirements: Pension funds, corporate treasuries, and asset managers often cannot custody or trade on venues that lack clean supervisory status. A regulated exchange like 1exchange operates under a licensed framework, which opens the door for a different class of liquidity provider and institutional capital.
• Cross-Border Alignment Gaps: A token listed on an Asian exchange may not be easily accessible to European or North American institutions without additional structuring. Custody integration, settlement finality, and the treatment of underlying fund shares across different legal regimes still pose friction points that regulators have yet to fully address.

Where Is the Tokenized Asset Market Actually Growing?

The sector's growth is uneven. Tokenized U.S. Treasuries remain the largest category with $15.86 billion in distributed value, up 2.23% over 30 days, but growth has cooled from a $35.2 billion peak recorded on July 10, 2026. The category's average seven-day yield sits at 3.30%, down 2.18% from the prior week.

Tokenized stocks and exchange-traded funds (ETFs) are posting the sector's strongest growth. Distributed value rose 15.10% over 30 days to $1.86 billion, while holders surged 75.71% to 671,490 in the same span. Monthly transfer volume jumped 31.75% to $8.00 billion. This suggests that retail and institutional investors are more willing to trade tokenized equities than tokenized bonds, possibly because equity markets already involve higher turnover and price discovery.

Tokenized credit instruments, led by Figure's HELOC token at $20.1 billion in represented value, dominate the entire real-world asset sector by value. Bridgetower's DOM X Arizona Copper-Gold Project holds $11.06 billion. These credit products often involve collateral movement and complex ownership structures where tokenization delivers genuine operational benefits.

What Do Institutions Actually Need to Adopt Tokenized Assets at Scale?

Franklin Templeton's Karkhanis framed the challenge in practical terms: "The technology exists, but liquidity in tokenized RWA and issuance is minuscule compared to traditional assets." Traditional distribution platforms like banks, brokerages, and fund platforms already provide custody, reporting, and access to retail and institutional capital. Many are still experimenting with proofs of concept rather than commercial deployments at scale.

"I believe there will be a diversity of offerings, both incumbents and DeFi next gen players will have an opportunity to participate," stated Chetan Karkhanis, who leads digital asset partnerships in Asia-Pacific at Franklin Templeton.

Chetan Karkhanis, Digital Asset Partnerships Lead, Asia-Pacific, Franklin Templeton

Rather than displacing existing finance, tokenization may extend it through traditional accounts, exchanges, wallets, and blockchain applications. Incumbents retain most investor relationships and assets, while decentralized finance (DeFi) platforms could attract newer generations of investors and their asset flows. Competition will likely depend on accessibility, product selection, regulated custody, consolidated reporting, and settlement efficiency rather than blockchain infrastructure alone.

Familiar products, including tokenized stocks, bonds, and exchange-traded funds, may offer the clearest route to broader distribution because investors already understand their risks and returns. Tokenization could deliver its greatest value in markets involving complex ownership, restricted access, or frequent collateral movement.

Looking five years ahead, Karkhanis expects blockchain infrastructure to fade into the background, with investors benefiting from tokenized products without needing to understand the underlying technology. Ultimately, adoption will depend on meaningful asset growth, wider investor participation, and sustained secondary market liquidity. He framed success in practical terms: "Simplifying that experience and making it seamless will ensure greater adoption and success will really be measured by the level of asset growth and investor adoption".