Franklin Templeton's latest research: How to understand RWA tokenization

Author: Sandy Kaul

Compiled by: Jiahua, ChainCatcher

As regulations become increasingly clear, trust in underlying crypto technologies continues to rise. The trend of using blockchain tokens to represent investable assets is accelerating.

The assets targeted by such tokenization include: stocks, bonds, funds, ETFs, commodities, private equity, private credit, real estate, and other types of private funds. The industry commonly refers to these as "real-world assets," or RWA.

This name is intended to distinguish them from native cryptocurrencies or altcoins—the latter invests in projects and protocols within the crypto ecosystem rather than assets in the real world.

Data from early 2026 shows that RWA tokenization is experiencing explosive growth. It is estimated to have grown fivefold since 2023, and tripled between 2025 and 2026. (1)

Starting from about $5 billion in 2023, the on-chain value has now exceeded $25 billion. Among these, private credit, government bond products, and real estate account for the vast majority. (2)

The growth is still accelerating. Predictions indicate that by 2030, the total scale of tokenized RWA could reach between $4 trillion and $16 trillion, with some forecasts suggesting it could exceed $30 trillion by 2033. (3)

Regardless of the specific numbers, the intensive announcements from core industry participants regarding tokenization plans have provided strong support for these predictions.

Pioneers Breaking the Ground

Tokenization of real-world assets is not a new concept. Franklin Templeton launched the first tokenized money market fund back in April 2021, which has been operating continuously 24/7, with a total scale nearing $1.5 billion on the Benji technology platform.

The real turning point that drew market attention was the extension of tokenization from government bonds and money market funds to stocks. Early entrants ignited this fire and accelerated the entire RWA tokenization process.

Robinhood was the first to announce in June 2025 that it would offer over 200 tokenized U.S. stocks to EU customers. Its CEO Vlad Tenev stated, "Tokenization is like a freight train that cannot be stopped and will ultimately consume the entire financial system." (4)

Crypto exchange Kraken quickly followed suit, launching xStocks on Ethereum and Solana in June of the same year, targeting investors outside the U.S., U.K., and other restricted areas. In the following nine months, xStocks recorded $3.6 billion in on-chain trading volume, with a total trading volume of about $25 billion, and nearly 80,000 wallets holding approximately $225 million in tokenized assets. (5)

Ondo Global Markets launched over 200 tokenized stocks in September 2025. In the first six months after the platform went live, the total value exceeded $500 million, with cumulative trading volume surpassing $7 billion. Combined with over $2 billion locked in tokenized U.S. Treasury products by Ondo Finance, its total scale continues to lead. (6)

Entry of Traditional U.S. Institutions

The actions of emerging platforms have already been eye-catching. However, what truly made the entire industry realize that "a new era has arrived" were the series of announcements made by top traditional institutions that followed.

The changes indicated by these announcements will be the most significant upgrade to the operation of securities since the introduction of book-entry systems in the early 1970s.

DTCC received a no-action letter from the SEC in December 2025, paving the way for it to provide DTC custody for tokenized RWA starting in the second half of 2026. (7)

The New York Stock Exchange (NYSE) announced the development of a platform for trading tokenized securities and on-chain settlement, supporting 24/7 operations, instant settlement, dollar-denominated orders, and stablecoin funding support. (8)

Nasdaq reached a partnership with Kraken's parent company to launch equity token designs for listed companies, supporting programmable investor interactions and automated corporate actions such as proxy voting and dividend payments, expected to go live in early 2027. (9)

Three Paths to Tokenization

The heat of tokenization continues to rise, but to truly understand how it will change the financial industry, several concepts need to be clarified. In the coming months, three types of tokenized products may emerge in the market:

Digitally Native Tokenized Products

Directly hold the underlying assets (stocks, bonds, commodities, or funds). Token holders enjoy full ownership and related protections, with ownership records maintained on a single on-chain ledger, with no off-chain records.

After transaction verification, funds and assets are immediately settled atomically. Franklin Templeton's tokenized money market fund falls into this category.

Synthetic Asset Tokens

Also a digitally native product, but do not directly hold the underlying assets. It is more like a swap arrangement that transmits the economic benefits generated by the underlying assets to the holders.

Token holders actually hold shares of a special purpose vehicle (SPV) that holds the underlying assets. These products are also referred to as "wrapped" or "asset-backed" investments. After transaction verification, payments and tokens are instantaneously exchanged. Robinhood, Kraken, and Ondo's tokenized stocks all belong to this category.

Digital Mirror Tokens

Do not directly hold the reference assets. Ownership of the assets is recorded in traditional off-chain forms (such as limited partner equity shares), and the token serves merely as a "receipt" proving that the holder owns the off-chain asset.

These products require two sets of ledgers: the off-chain legacy system records actual ownership (usually requiring overnight batch processing updates), while the on-chain ledger separately tracks the tokens. Positions are established and verified off-chain before tokens are minted; once the position exits, the tokens are immediately destroyed. They are subject to traditional T+1 or longer settlement cycles. The plans of DTCC, NYSE, and Nasdaq all fall into this category.

Permissioned vs. Permissionless Tokens

All three models require transfer agents to execute a new type of compliance process—"Know Your Token" (KYT). This process reviews the wallet addresses buying and selling tokens and tracks recent transaction records of the tokens. The blockchain itself, through whitelisting, collaborates with this review to confirm that the wallet is not on any restricted list and that the holder has completed qualification verification.

Synthetic asset tokens do not require additional verification beyond KYT, thus they are classified as permissionless tokens. As long as the wallet passes KYT verification and meets holding conditions, transactions can proceed directly.

Digitally native products and digital mirror tokens are classified as permissioned tokens. Simply passing KYT is not sufficient; holders must also complete full KYC/AML (Know Your Customer/Anti-Money Laundering) reviews.

Utility Differences Among the Three Models

Synthetic Asset Tokens have the broadest utility within the crypto ecosystem, but offer the least protection for investor rights.

These tokens can freely circulate among any wallets that meet KYT conditions, can be deployed in DeFi protocols as assets or collateral, allowing holders to seek liquidity 24/7 and potentially earn additional returns.

However, the trade-off is that holders have no voting rights, economic benefits (yields, dividends) are transmitted indirectly rather than paid directly, and in most cases, there are no claims against the issuers of the underlying assets.

Digitally Native RWA Tokens have slightly less utility but face more restrictions. Tokens can be transferred between wallets, but only to wallets that have simultaneously passed both KYT and KYC/AML verification. Holders are the official owners of the RWA, enjoying full voting rights and direct economic benefits.

These tokens are difficult to use in DeFi—tokens staked to protocols mix into liquidity pools and cannot correspond to specific wallets. However, they are highly efficient as collateral for financing arrangements and derivatives trading.

Due to ownership records being updated on-chain every second, their advantages cannot be achieved in traditional models. For example, in Franklin Templeton's tokenized money market fund: interest begins accruing the moment an investor establishes a position, and returns are directly deposited into the wallet in the form of incremental new tokens every day—something the digital mirror model cannot achieve.

Digital Mirror Tokens have the lowest utility among the three models. The management of rights and interests is executed by the off-chain legacy system, with distributions entering traditional investment accounts via fiat currency, paid at fixed intervals (e.g., money market fund pays returns at the end of the month). Tokens are bound to specific off-chain positions, cannot be transferred between wallets, minted upon subscription, and destroyed upon redemption.

Even so, digital mirror tokens still have their value: tokens exist directly in the investor's wallet rather than as a line item in an intermediary's database, providing greater transparency. The tokenized form also supports 24/7 trading, allowing on-chain token records to refresh in real-time, even if off-chain ownership records experience delays in updates.

Moving in the Right Direction

Compared to the traditional methods that have dominated securities and fund processing for the past 50 years, the three RWA tokenization models each have their unique advantages and new utilities.

All paths are based on the latest blockchain technology, with tokens serving as "smart" wrappers that embed operational processes and execute them automatically. Each model enhances the transparency of holdings, making assets easier to use as collateral, and some models even create entirely new revenue opportunities.

Most importantly, RWA tokenization is driving the entire financial industry, whether crypto-native institutions or traditional financial participants, toward a shared infrastructure.

Wallets will become the core financial interface for individuals and institutions. And today's wave of RWA tokenization is the bridge to that future.

Sources

1. Coindesk, "RWA Tokenization Market Grows Nearly Fivefold in Three Years to $24 Billion" June 26, 2025

2. Brikken, "2025 Real-World Asset Tokenization: Market Leaders, Asset Trends, and Future Outlook," 2025

3. Ibid

4. CNBC, "Asset Tokenization is a Freight Train Heading to Market: Robinhood CEO," October 2, 2025

5. Trading View News, "Kraken Launches xChange Engine to Power Tokenized Stock Trading"

6. Ondo Finance, "Ondo Becomes Largest Dual Supplier of Tokenized Treasuries and Stocks, tvl-7532">Total Value Locked Exceeds $2.5 Billion"

7. DTTC, "Paving the Way for Asset Tokenization under DTC Custody"

8. Intercontinental Exchange, "New York Stock Exchange Develops Tokenized Securities Platform"

9. Nasdaq, "Nasdaq Launches Equity Token Design, Placing Issuers at the Core of Tokenization"