What are the future and risks of financial asset tokenization? A comprehensive analysis of RWA in a 73-page report by global securities regulators.

IOSCO report reveals that financial tokenisation is a “progressive grafting” rather than a revolution. The reality is that implementation is scarce, and it faces legal uncertainty, settlement bottlenecks, and potential risk contagion challenges. (Synopsis: Standard Chartered: RWA Market 2028 Size of $2 trillion, most of the value will be concentrated in Ethereum) (Background supplement: 57 times increase in three years? Standard Chartered: The size of the RWA market in 2028 looks at $2 trillion, DeFi has shaken up traditional finance) The International Organization of Securities Commissions, the global securities regulator International Organization of Securities Commissions, (IOSCO) released an in-depth 73-page report titled “Tokenization of Financial Assets” on (11 ) this week (Tokenization of Financial Assets) explores the potential and risk gaps of the technology. The following dynamic area analyzes the important points of this report for you (browse the original report) Core diagnosis: a gradual evolution of “thunder is loud, rain is small” The narrative of the market is always passionate, but IOSCO's data is cold. The report debunks the real-time illusion that “everything can be tokenized” and reveals the harsh reality of the beginning: Despite widespread interest from financial institutions (the FTF survey shows that interest is almost half-high), a survey by IOSCO's Fintech Working Group (FTF) shows that when it comes to the commercial use of real money, up to 91% of the jurisdictions surveyed remain “zero or very limited” stages. Evolution, not revolution: The essence of this change is “gradual” and “incremental.” So-called tokenization, at many key points in the life cycle, still relies heavily on traditional financial infrastructure and intermediaries. It's not about reinventing the wheel, it's more like replacing parts on a Boeing 747 engine that's still running, careful and full of compromise. Beachhead: Why bonds and MMFs? Not all assets are created equal. Silicon Valley dreams of tokenized stocks and real estate, but Wall Street's blade always cuts to where the blood (profits) are most visible. Fixed Income ( Bond ): This is currently the most active testing ground. There's no other reason: The back-office processes in traditional bond markets, from issuance and registration to settlement, are in many ways stuck in the last century. It's filled with siloed databases, tedious manual processes, and lengthy billing cycles. Tokenization is seen as a good medicine that promises to significantly compress issuance time and costs. Money Market Funds (MMFs): This is another flashpoint. The entry of giants such as BlackRock (BlackRock) and Franklin Tamburton (Franklin Templeton) marks more than just an experiment. Their motives are even more profound: not only to improve the efficiency of the subscription and redemption of MMFs themselves, but also to see the huge potential of MMFs as “quality collateral”. Stock (Equities): The report is blunt about this: the market for equity tokenization “remains very limited.” Because in developed countries, existing public stock markets are already “highly efficient”. This operation, for the time being, does not need to be operated on here. Cutting the life cycle A highly uneven operation When we cut through the full life cycle of an asset with a scalpel, the impact of tokenization is extremely uneven: Issuance and sale: The process has evolved, but the core roles of issuing agents, underwriting banks, and law firms remain. They just replaced the documentation counter with the DLT platform, and the essential work has not disappeared. For example, UBS's digital bond issuance process remains “largely unchanged” from traditional practices. Trading & Clearing: This is the most embarrassing and “compromise” part. Trading: The impact is very limited. Most tokenized securities are still listed on traditional exchanges (such as UBS's bonds are dual-listed on both SDX and SIX Swiss Exchange) or face serious liquidity fragmented issues. Liquidation: This is the core commitment of DLT. Atomic Settlement (T+0), but the report found a profound irony: when available, market participants still seem to prefer traditional T+2 settlement infrastructure. The reasons behind this are complex: unfamiliarity with DLT infrastructure, fear of digital native risks (operational or network), and the powerful-to-shake network effects of traditional clearing systems such as SIX SIS. Asset Services: Escrow (Custody): Enables digital escrow, but also opens Pandora's box — the management of private keys and the legal definition of ownership. Collateral Management: This is probably the most substantial development so far. DLT has significantly improved collateral liquidity, and J.P. Morgan's Kinexys platform has even enabled “intraday repo transactions” (intraday repo transactions), which is almost unimaginable in traditional systems. Three deadly “Achilles' heels”: Latent systemic risk The real value of this report is that it calmly points out the potential “rejection” and “infection risk” in this “grafting” experiment. A. The Ghost of the Law: Who is the real “Golden Record”? This is the “original sin” of almost all tokenized projects. It took hundreds of years for traditional finance to establish a clear legal framework to define “ownership.” But the emergence of DLT tore this consensus apart. On-chain vs off-chain: When an on-chain token record on a blockchain conflicts with the ledger of a traditional central depository or transfer agent, which one is the legally enforceable “golden record”? BlackRock (BUIDL) admits that its off-chain Securitize record is the legal ownership record. An on-chain record is more like an efficient “copy”. Franklin Tamburton (BENJI) adopts a hybrid model, claiming that the blockchain is “an integral part” of the main record, but the transferring agent retains ultimate control. Switzerland (SDX): Relying on its status as a regulated CSD and the support of the Swiss DLT Act, its DLT ledger is the main legally valid registry. B. Infrastructure vulnerabilities The risks of erecting trillion-scale financial assets on DLT are unique and deadly: Smart contract risk: Code is the law, but code can also be fraught with vulnerabilities (Bugs). On an immutable ledger, one mistake can lead to catastrophic, irreversible losses. For example, on a Layer 2 solution, when does a transaction “really complete”? Is it when confirmed on L2, or when anchored on L1 mainnet? The report astutely points out the enormous legal risks posed by this ambiguity. The report also mentions private key risks: in the traditional world, you can reset your password; In the crypto world, you can lose everything (although reports indicate that registered security tokens can be reissued by issuers). C. The absence of the “holy grail”: Reliable on-chain settlement assets, which is the biggest bottleneck to expansion. You can easily transfer tokenized bonds on-chain, but what do you use to pay for the transaction? Lack of reliable payment instruments: To achieve true DvP (Bond Payment), you need a high-liquidity, on-chain settlement asset with no credit risk. Options and their drawbacks: Central bank digital currencies…