Tokenization is the process of representing real-world assets as digital tokens on a blockchain. The token serves as a digital record of ownership — a claim on the underlying asset — issued, tracked, and settled onchain. 

That shift has massive practical consequences. A tokenized asset can be transferred in seconds, settled without intermediaries, and held in a self-custody wallet alongside any other crypto token. Contrary to traditional capital markets that still run on financial plumbing from the 1970s, tokenization enables the ‘internet of value’ where asset transfers and settlements take seconds, rather than days. 

The rails are real, and institutional demand is surging. Tokenized real-world assets excluding stablecoins now exceed $31.7 billion, with tokenized US Treasuries alone approaching $15 billion. In 2026, though, the term ‘tokenization’ still routinely conflates two unrelated concepts. The first is data security tokenization, which replaces sensitive credit card numbers with placeholders for PCI compliance. The second, and the focus of this article, is blockchain asset tokenization: converting claims on real-world assets (RWAs) into onchain tokens.

Regulation is also catching up to technology, particularly through regimes such as the US GENIUS Act, which establishes federal frameworks for stablecoin-based payments. These are streamlining and broadening access to tokenized assets for a range of actors, from treasury departments and retail investors to autonomous agentic actors. Thus, a deep understanding of the tokenization stack and how value settles across chains is critical for those who intend to position themselves early and capitalize on the next wave of capital market infrastructure. 

That’s why, in this article, we walk through the tokenization stack end-to-end: what tokenization is, how it works, what can be tokenized, the types of token standards, the friction points it solves, and the cross-chain routing infrastructure required to move tokenized assets across networks. Let’s dive in.

Key Takeaways

• Tokenization is the process of converting rights to a real-world asset into a blockchain-based digital token, which becomes a tradable onchain representation of the underlying asset’s value. 

• Asset selection, legal structuring, token minting, custody and verification, distribution, and redemption — these are key aspects of the tokenization process. 

• While anything with a defined ownership structure can be tokenized, stablecoins and government securities (T-bills) are the fastest-growing tokenization verticals in 2026, led by institutional products like BlackRock’s BUIDL, Franklin Templeton’s BENJI, and OpenEden’s TBILL.

• Though tokenization solves fractional ownership and settlement speed, it introduces a major cross-chain problem: assets minted on one chain are siloed there. LI.FI Intents, with support for tokenized treasuries and configurable compliance controls, solves this by providing compliance-aware, cross-chain routing.

What tokenization is (and how it differs from data security)

Payment companies first popularized “tokenization” in the early 2000s as a security technique to protect payment card data. TrustCommerce is widely credited with originating the concept in 2001, and Shift4 brought it to payment cards in 2005, before EMVCo and the card networks standardized it around 2014.

However, this legacy framing introduced a category of data security that differs fundamentally from blockchain asset tokenization in three main ways: 

1. Substitution vs. representation: Data security tokenization replaces sensitive data (such as a credit card number) with a non-sensitive, mathematically unrelated placeholder token. Blockchain tokenization, by contrast, represents a direct legal and economic claim on an underlying physical or financial asset (such as gold, real estate, or a Treasury bill). 

2. Vault-bound vs. network-native: Security tokens are vault-bound. They don’t have any intrinsic value and can be decrypted or reversed only by the issuing system. Blockchain tokens are network-native, circulating freely across globally distributed, ledger-based networks where their ownership is verified, and transfers are settled in real time. 

3. Compliance vs. capital markets: Data tokenization is a defense mechanism that payment processors have built to meet PCI DSS requirements. Blockchain tokenization is a capital markets technique designed to unlock liquidity, enable fractional ownership, and introduce programmable finance.

They share a name, but that’s about it. While data tokenization secures existing payment systems, blockchain tokenization is rebuilding the financial plumbing itself, turning what was once a siloed registry of assets into a global, interoperable market.

How tokenization works: From asset to onchain token

Tokenization converts an asset’s ownership record into a smart-contract-issued token. The process typically follows these five steps: 

1. Asset selection and legal structuring: The issuer chooses an underlying asset and establishes a legal framework (often involving a Special Purpose Vehicle, or SPV) that binds token ownership to a real-world claim. For tokenized treasuries, a legal entity holds the T-bills and issues tokens representing fractional shares of that specific entity. 

2. Token minting: A smart contract mints onchain tokens representing the asset. Each token corresponds to a specific quantity of the underlying (for example, 1 token equals $1 of T-bill value or a 0.001% fractional share of a commercial property). 

3. Custody and verification: The underlying asset is held by a regulated custodian or trustee. For physical assets like gold or real estate, independent auditors or blockchain oracles (like Chainlink Proof of Reserve) verify that the physical assets in storage match the supply of outstanding onchain tokens. 

4. Distribution and trading: Token holders can transfer, sell, or use their tokens as collateral in DeFi, without contacting the custodian or waiting for bank business hours. Settlement occurs onchain in seconds, 24x7.  

5. Redemption: When a token holder wants to redeem their capital, they return the tokens to the issuer’s smart contract. The tokens are burned, and the issuer triggers a redemption payment from the custodian to the user’s wallet, often paid in stablecoins. 

This structure collapses the traditional settlement chain. 

Currently, a corporate stock trade, for example, passes through brokers, custodians, clearinghouses, and transfer agents, with settlement on the next business day (T+1, shortened from T+2 in May 2024). Even US Treasuries, which already settle same-day or T+1, still depend on that intermediary stack. Tokenized treasuries or stocks, however, settle onchain in under a minute, 24x7x365, with delivery and payment clearing atomically in the same transaction.

What can be tokenized?

Almost any asset with a defined ownership structure can be tokenized. The real question is whether the legal framework and market demand justify the underlying infrastructure cost.

That said, stablecoins are currently the largest, most mature category of tokenization. USDC, USDT, and yield-bearing stablecoins like Paxos-backed USDL represent tokenized fiat currency. They collectively hold roughly $314B in market cap as of June 2026, process trillions in annual transfer volume, and prove that tokenized assets can scale to institutional volumes. And building on this product-market fit, tokenized government securities have now emerged as the fastest-growing category in 2026. 

Institutional products such as BlackRock’s BUIDL, Franklin Templeton’s BENJI, and OpenEden’s TBILL are tokenized US Treasury bills. They let holders earn real-world T-bill yields natively in their crypto wallets, while also deploying tokenized assets as collateral across DeFi. Moreover, platforms like OpenEden have integrated LI.FI, which allows their users across 15+ chains to swap stablecoins and mint yield-bearing TBILLs directly on Ethereum or Arbitrum in a single transaction. 

Besides stablecoins and tokenized treasuries, tokenized real estate has become a key RWA vertical, converting illiquid property ownership into divisible digital shares. For example, a commercial building worth $10M can be fractionalized into 10 million tokens, each worth $1. This lets retail investors participate without purchasing an entire property, turning what was historically a private placement restricted to accredited investors into a divisible, transferable asset. Divisibility is not the same as liquidity, though: secondary markets for tokenized real estate are still thin, and a token is only as tradeable as the demand on the other side.

For a closer look at how property tokenization works in practice and how you can get in, check out our Tokenized Real Estate deep dive.

Another category of tokenized assets that’s rapidly gaining in both popularity and demand includes commodities: gold, crude oil, or agricultural products. Led by gold-backed stablecoins like Tether Gold (XAUt0), these tokens represent a defined quantity of the physical commodity held in highly secure, audited vaults. Holders thus get price exposure, without the custody overhead of physical storage. 

Finally, credit, private equity, and intellectual property are among the other asset classes currently being tokenized. Credit and private equity tokenization cover debt instruments, corporate bonds, and fund shares. Institutional platforms like Coinshift and Morpho lead this domain, powered by LI.FI’s cross-chain deposit routing infra. On the other hand, intellectual property tokenization is a budding category in which royalty streams or licensing agreements for music, patents, and so on, are represented as tokens that automatically distribute cash flows using smart contracts or other onchain mechanisms. 

New to this domain? For a plain-English overview of the asset classes, the buying process, and the underlying infrastructure, read our extensive guide to Real-World Assets (RWAs) in crypto.

Types of tokenization

The mechanics of tokenization shift depending on the asset being tokenized and how ownership is structured. The industry relies on a handful of token standards, each suited to a different ownership structure:

• Fungible tokenization: Each token is identical and interchangeable. One USDC is identical to any other USDC; one BUIDL token is identical to another BUIDL token. Fungible tokens are issued using the ERC-20 standard on EVM chains (or equivalents on non-EVM chains). Most stablecoins and treasury-backed RWAs use this standard. 

• Non-fungible tokenization: Each token has a unique identifier. This is used for assets where individual identity is critical, such as a specific parcel of real estate, a unique legal contract, or a particular piece of art. Each token represents one specific asset rather than an interchangeable share of a pool. 

• Semi-fungible tokenization (ERC-1155): Formally known as the Multi-Token Standard, this allows a single smart contract to manage both fungible and non-fungible tokens. It’s useful for structured financial products or debt tranches, where all tokens within a specific category (e.g., senior debt) are fungible, but the categories themselves are distinct. 

• Permissioned tokenization (ERC-3643): Also called the T-REX standard, this is purpose-built for regulated securities and RWAs. It embeds onchain identity and transfer restrictions directly into the token, so the contract itself enforces KYC/AML and investor-eligibility rules. Only verified, whitelisted addresses can hold or receive the asset. Maintained by the ERC-3643 Association (whose members include DTCC, Apex Group, and Invesco), it has become the default standard for compliant security tokens. 

• Vault tokenization (ERC-4626): A standard interface for yield-bearing vaults that turns a yield position into a composable, ERC-20-compatible share token. It’s the plumbing beneath yield-bearing RWA products. The Morpho vaults underpinning csUSDL, for example, expose an ERC-4626 interface. 

The choice of token standard also dictates how assets move across blockchains. Chainlink’s Cross-Chain Token (CCT) standard, introduced under CCIP v1.5, provides a secure, self-service framework for issuers to make their tokens natively routeable across chains. LI.FI natively supports CCT-issued tokens, meaning any asset tokenized under this standard is immediately available for cross-chain routing upon minting.

For how competing token frameworks handle cross-chain issuance and transfers, see Comparing Token Frameworks. 

Benefits of tokenization

Blockchain tokenization directly addresses several inefficiencies inherent in traditional asset markets, covering ownership, settlement, compliance, composability, and transparency. 

First, tokenization enables fractional ownership, breaking down large minimum investment thresholds and lowering entry barriers. A $50M private credit fund that traditionally required a $1M minimum commitment can issue tokens at a $1,000 face value, dramatically expanding the addressable base of capital.

Second, it eliminates the clearinghouse and brokerage friction behind multi-day settlement cycles (US equities only moved to T+1 in 2024). Onchain transactions settle atomically in seconds, freeing up capital that would otherwise be locked during settlement and removing counterparty risk in the settlement window. 

Third, tokenized assets have programmable compliance, encoding transfer restrictions, KYC/AML checks, and jurisdictional rules directly into the token’s execution logic. Thus, the token itself becomes a regulatory gatekeeper, automatically rejecting transfers to unverified addresses or restricted jurisdictions.

Fourth, tokenized assets are typically usable across composable DeFi systems. Tokenized T-Bills, for instance, can be used as collateral in lending protocols, deposited into vaults, and bundled into complex yield strategies in a single click. 

Fifth, where relevant, public blockchains act as a single, immutable source of truth. Issuance, redemptions, and circulating supply are auditable in real time, reducing the risk of synthetic over-issuance or reporting fraud.

The cross-chain problem that tokenization doesn’t solve

Solely focusing on the mechanics and benefits of tokenization misses a critical point: once an asset is tokenized, where does it live and, more importantly, how does it move? And that’s the mistake most existing guides on this topic repeat. Let’s fix it. 

Tokenized assets are mostly minted on a specific blockchain. Thus, a token on Ethereum or one of its Layer-2s cannot be used in a Solana-based DeFi protocol without first being bridged. For most issuers, bridging tokenized RWAs is a compliance and security nightmare. And even if they natively issue tokens across chains to avoid bridging — as BlackRock did for BUIDL — they end up with fragmented liquidity across these deployments. 

Moreover, traditional bridging relies on retail-oriented liquidity pools that introduce high slippage, gas overhead, and smart contract vulnerability. This is a key infrastructure gap in the RWA economy, and for tokenized assets to be practically usable, they require: 

• Cross-chain routing to securely move assets between networks. 

• DeFi protocol integration to make the tokens usable as collateral and yield sources. 

• Compliance-aware execution that respects KYC/AML and jurisdictional rules before value moves. 

• Multi-step execution that can compose a complex bridge, deposit, and stake workflow into a single click.

LI.FI solves this at the routing layer. Now, more than ever, since LI.FI Intents went live on May 26, 2026. This modular execution engine fills cross-chain and same-chain orders through a competitive network of professional market makers or solvers. Instead of choosing a bridge, an issuer or integrator simply expresses their ‘intent’ or the desired outcome: say, deliver this asset to this address on this chain. Solvers compete to fill it, fronting destination-chain liquidity and getting reimbursed from locked source funds once settlement is verified. 

That said, Intents is the official foundation of the Open Intents Framework, the Ethereum Foundation-backed standard for intent-based execution, and is already live in production on Jumper and Rabby across EVM chains, Solana, and Tron. 

For tokenized assets specifically, Intents provides unified access to multiple tokenized-asset issuers through a single integration, rather than a separate bridge integration per issuer. This covers everything from onchain treasuries, equities, and gold to the broader, emerging RWAs. 

Compliance is built into the execution path as well, not bolted on after the fact. With OFAC screening at the wallet level, a solver network of KYB-verified legal entities, and integrator-controlled solver selection, regulated issuers can precisely determine which solvers are permitted to execute their flows. While for assets issued under the Chainlink CCT standard, LI.FI adds native routing support on top, making them cross-chain-ready from the get-go.

On top of that, the LI.FI Composer boosts composability for tokenized assets, letting developers bundle bridge, swap, and deposit actions into a single signed transaction. This lets users bring stablecoins from, say, Arbitrum, and deploy them directly into a yield-bearing Treasury vault on Ethereum in a single step. It’s also a key unlock for agentic actors interacting with RWAs or other tokenized assets. 

Some live, practical examples of tokenized assets

Before we wrap, it’s worth looking at live examples of tokenization and tokenized assets, across verticals and use-cases: 

• Stablecoins like Circle’s USDC or Tether’s USDT are the canonical examples of tokenized fiat (specifically, US dollars). The issuers hold USD reserves in cash and short-term US Treasuries, and USDC/USDT tokens represent claims against those reserves. 

• BlackRock’s BUIDL is a tokenized money market fund invested in US Treasury bills, cash, and repo agreements. Launched in March 2024 on Ethereum and since expanded across multiple chains, it distributes yield directly to token holders’ wallets and targets institutional investors with a $5M minimum. It holds roughly $2.4B in assets — now the second-largest tokenized Treasury fund, behind Circle’s USYC. 

• Paxos’ PAXG (Pax Gold) is tokenized physical gold. Each PAXG token represents one troy ounce of physical gold held in audited Brink’s vaults in London, allowing holders to redeem tokens for physical gold bars or trade them instantly in DeFi. 

• Pendle splits yield-bearing assets into Principal Tokens (PT) and Yield Tokens (YT), tokenizing the future yield separately from the underlying principal. By integrating LI.FI, Pendle has also enabled users to access yield-tokenization strategies across any chain. 

• Coinshift’s csUSDL is a Morpho-based yield-bearing institutional vault. csUSDL aggregates Paxos-backed USDL yields and Morpho lending rates, while LI.FI facilitates cross-chain deposits, ensuring seamless access to liquidity across all major chains.

The consistent pattern across these examples highlights the crux of blockchain tokenization and what it unlocks: assets are tokenized under a defined legal structure, and then the token itself becomes the instrument of trade, collateral, and yield generation. 

Besides enabling new asset classes, this significantly boosts liquidity and market access. Even more so, thanks to innovations like LI.FI’s intents-based routing and cross-chain infrastructure that breaks traditional silos and lets tokenized value flow seamlessly across ecosystems. 

Frequently Asked Questions (FAQs)

Is tokenization the same as encryption?

No. Encryption mathematically scrambles data using a key so it can be decrypted later. Data security tokenization replaces sensitive data with random placeholder tokens stored in a secure vault. Blockchain tokenization creates a tradeable, onchain digital twin of a real-world asset. All three are fundamentally different techniques. 

What assets can be tokenized?

Any asset with a definable ownership structure can be tokenized. In practice, the largest categories are stablecoins (fiat currency), government securities (T-bills and bonds), real estate, commodities (gold, silver), private credit, and intellectual property royalties. 

Is tokenization safe?

Tokenized assets inherit the security profile of their underlying blockchain, issuer, and legal structure, and several distinct risks compound. 

Smart contract bugs in the token contract could affect holders. Custodian failure can leave token holders ranking as unsecured creditors. And legal enforceability varies: whether a token conveys real title to the asset or merely a contractual claim against the issuer depends entirely on the legal wrapper. 

Redemption can also be gated, since issuers retain the ability to pause withdrawals, so settling onchain in seconds doesn’t always mean instant access to the underlying. RWAs used as DeFi collateral are also subject to stress in the underlying markets. 

However, projects with audited contracts, regulated custodians, bankruptcy-remote legal structures, and transparent reserves carry the lowest risk. 

What is the difference between tokenization and blockchain?

Blockchain is the underlying infrastructure — a distributed ledger that records transactions without a central authority. Tokenization is a specific application of that infrastructure: the process of issuing digital tokens that represent ownership of something. Blockchain enables tokenization, but it also supports other use cases.

How do tokenized assets move across blockchains?

Moving tokenized assets across blockchains requires secure routing infrastructure. Aggregators and intents-based execution layers like LI.FI handle this automatically, selecting the optimal path based on fees, speed, and security. 

Further, because tokenized assets often carry KYC/AML and jurisdictional requirements, LI.FI Intents routes them through a competitive solver network with configurable, execution-level OFAC screening, a KYB-verified solver network, and integrator-controlled solver selection. 

Try it!

Stablecoins proved the model. Tokenized treasuries, equities, and commodities are scaling it. With that, the open question has evolved from whether assets can be tokenized to how their value can be moved across chains, without sacrificing compliance or settlement quality. 

LI.FI Intents, along with our entire product suite, closes this gap. 

Built alongside the Ethereum Foundation’s Open Intents Framework, Intents routes tokenized assets across chains through a competitive solver network, with unified access to tokenized-asset issuers and configurable compliance controls — OFAC screening, KYB-verified solvers, and integrator-controlled routing — built in from day one. 

Check out our official documentation to start building on LI.FI. Or reach out to our team if you need help figuring out RWA infrastructure requirements tailored to your needs.