Blockchain – the technology that makes cryptocurrency possible – could also make it faster, easier and less expensive to purchase and sell almost any asset online.
Asset tokenisation creates digital tokens representing assets like stocks, bonds, funds, real estate, intellectual property, artwork, gold and even collections of whiskey and wine.i Investors can then trade those tokens over a blockchain with little or no involvement from intermediaries. Buy the token, and you own the underlying asset.
Proponents argue that tokenisation will revolutionise the worlds of finance and investment by lowering costs, accelerating transactions and increasing liquidity. Tokenised assets could grow from roughly $600 billion today to $18.9 trillion by 2033, according to a report by Ripple and Boston Consulting Group.
Established companies like JPMorganChase, Robinhood and Coinbase see an opportunity and are moving into this space.
At the same time, asset tokenisation could present its own set of risks and drawbacks. For starters, the regulations governing this area of the market are still evolving.
If tokenisation does take off, though, it could boost efficiency for financial firms, improving their margins, boosting their stocks and benefiting investors.
What makes asset tokenisation possible
To understand asset tokenisation, investors need to understand two technologies: blockchains and smart contracts.
Blockchains
A blockchain is a distributed, decentralised ledger with copies existing on computers and servers (called nodes) around the world.
- When someone buys Bitcoin or uses it to make a purchase, they aren’t transferring physical coins or data. Instead, the global ledger is updated to reflect that Person A sent one Bitcoin to Person B.
- Anytime a blockchain records new transactions, every copy of the ledger is updated, too.
- Any additions or edits require consensus among the nodes on the blockchain. No single person or entity can make a change on their own.
Smart Contracts
Blockchain transactions can also incorporate smart contracts, a type of self-executing program. These programs automatically take certain actions in response to different triggers.
- For example, a vendor and buyer might set up their smart contract so the program releases the payment as soon as a shipment arrives at the buyer’s warehouse.
- Not only do smart contracts streamline payment and settlement, but they also guard against counterparty risk, i.e., the other guy doesn’t pay up as promised.
This is a very high-level description of how blockchains and smart contracts work. They are designed to resist tampering and fraud. That creates a level of trust for financial transactions – including ones involving tokenised assets.
How does asset tokenisation work?
Asset tokenisation applies the strengths of blockchain — immutability, transparency and programmable ownership — to assets that exist in the real world.
That could include:
- physical assets like real estate, art and gold
- financial assets such as stocks, bonds and private equity
- intangible assets — for example, patents and other intellectual property
A token is created to represent ownership interest in an asset, so that particular asset can be transferred or traded through a blockchain’s global, 24/7 network.
In most cases, tokenisation requires a custodian or trustee to verify the underlying asset exists and to maintain secure custody. This ensures that every token remains backed by a real asset at a 1:1 ratio.
Once the token exists, it’s ready to be traded using a blockchain’s systems, the same way that cryptocurrencies do now.
Potential benefits
Tokenisation could prove useful for illiquid assets like art, collectibles or private assets, items that typically don’t trade often. But tokenisation may also benefit assets that are already liquid, simply because tokenisation comes with multiple advantages, including:
- Faster transactions: Blockchain settlement can occur in seconds or minutes versus the one-to-two-day clearing period of traditional financial systems.
- Reduced costs: Generally speaking, transactions require fewer intermediaries. As a result, transaction and administrative fees should decline.
- Increased access: Tokenised assets can change hands 24/7. Users aren’t limited to business hours.
- Lower bar to entry: Tokens can be fractionalised or divided into smaller units that can be traded. This could allow less wealthy investors to buy a piece of illiquid assets such as artwork or real estate.
- Enhanced liquidity: Easier, 24/7 global trading can make historically illiquid assets more tradable and accessible, broadening the pool of potential buyers and sellers.
Possible risks
Existing laws aren’t always a perfect fit for something as new as tokenised assets. Some countries and international bodies have tried to develop rules, but those frameworks may be incomplete or untested.
In July 2025, the US regulator Securities and Exchange Commission reiterated that tokenised securities are still securities, which means they must comply with existing securities law. But the SEC also signalled that it’s open to working with the industry to develop exemptions or new rules.ii
Also, illiquid assets like artwork, collectibles or private companies can be hard to value at times. As a result, their corresponding tokens could fluctuate sharply in price, depending on the market.
Lastly, when an average investor buys an ETF or mutual fund; they usually understand the risks involved. They may not know as much about tokens or the assets they represent. They could face a higher risk of paying too much or struggling to sell an illiquid token.
Opportunity?
There could be significant potential in tokenised assets, especially for companies that enable or facilitate the tokenisation process. Stablecoin issuers may also gain an edge if investors use their currencies to buy tokenised assets.
Alternative asset managers could benefit from tokenised versions of traditionally illiquid assets, improving liquidity, transparency and settlement speed for their portfolios. While tokenised assets may carry risk, they’re positioned to streamline finance and investing while expanding investor access. Their strengths make them a compelling opportunity in the evolution of digital markets.
By Raj Kartham, Investment Analyst, and Jonathan Bauman, Vice President and Senior Client Portfolio Manager, at American Century Investments
