In recent years, the cryptocurrency market has been actively promoting the concept of RWA — the tokenization of real-world assets. This term refers to the transfer of ownership rights to physical or financial assets (real estate, bonds, gold, etc.) into digital form, most often in the form of tokens on a blockchain. This direction is positioned as a bridge between traditional finance (TradFi) and decentralized finance (DeFi), promising liquidity, accessibility, and transparency.
However, behind the facade of technological progress lie fundamental legal, economic, and ethical problems that call into question the real value of RWA for the end user.
1. Legal Insolvency of Tokens as a Form of Ownership
The Problem of Lack of Legal Recognition
At present, in most jurisdictions, a token representing a share in a real asset is not recognized as a legally significant form of ownership. For example, if you buy a token supposedly backed by 0.01% of a building in London, this does not mean that your name will be entered into the UK land registry. Without a law recognizing a token as a legal title, it is simply a digital record.
Example: The project Lofty.ai offers investments in tokenized real estate in the U.S. However, despite promises of a "share in a house," legally the investor owns a token linked to a trust or company that owns the property. This is indirect ownership, not granting direct rights to the object.
Registries vs. Blockchain
Government property registries are legally recognized sources of truth. Blockchain is a decentralized database without legal force unless integrated with state structures. As long as there is no law recognizing blockchain as a registry of rights, tokenization remains outside the legal field.
2. Institutional Hype: Infrastructure or Marketing?
Banks and Funds: Participation Without Responsibility
Many large financial institutions claim interest in RWA. For example, BlackRock, JPMorgan, and Citi participate in pilot projects for the tokenization of bonds and funds. However, this participation is limited to internal experiments that do not provide the end investor with legal guarantees.
Example: JPMorgan Onyx is a platform for tokenizing debt instruments. It is used inside the bank for settlement optimization, but it does not provide tokens recognized by regulators as full-fledged assets.
Marketing Packaging
Projects often use terms such as “infrastructure of the future” or “ownership revolution” to attract investors. However, behind these slogans, old schemes are often hidden in new wrapping, where the token is simply a way to raise money without real obligations.
3. Tokenization of Real Estate: The Myth of the “Share in a Building”
The Illusion of Ownership
One of the most popular narratives in RWA is the ability to buy a “share” in a real estate object. In practice, this almost always means ownership of a token linked to a legal entity (e.g., a trust or LLC) that owns the asset. This does not grant direct property rights, does not allow you to dispose of the property, does not provide access to the registry, and does not protect you in the event of the project’s bankruptcy.
Example: The project RealT offers tokens backed by U.S. real estate. The investor buys a token representing a share in a company that owns the house. However:
- The investor is not listed in the property registry.
- They cannot sell the house, rent it out, or change the ownership conditions.
- All rights belong to the management company, and the token is only a digital contract.
Lack of Legal Integration
Even if a project claims “legal linkage” of a token to an asset, this does not mean that the state recognizes such ownership. In most countries, property registries are centralized and regulated, and blockchain has no access to them. Without legislative change, the token remains outside the legal field.
4. Tokenization of Debt and Bonds: Partial Legitimacy
U.S. Treasury Bonds
Some projects, such as Ondo Finance, offer tokenized versions of U.S. Treasury bonds. This looks more reliable, since the asset is government debt and the issuer is a licensed company. However, even here there are nuances:
- The token is not the bond itself but represents a share in a fund that owns the bonds.
- The investor does not have a direct contract with the government.
- In case of default or legal conflict, protection is limited.
Example: Ondo Finance issues OUSG tokens backed by Treasury bonds. These tokens can be used in DeFi protocols but do not provide direct access to the asset — only to its yield through an intermediary.
Cash Flows vs. Property Rights
The tokenization of debt and income is not asset ownership but trading in future cash flows. This can be useful for hedging or liquidity but does not grant legal rights to the asset itself. This is a derivative instrument, not ownership.
5. NFT and RWA: Parallels and Repeating Mistakes
NFT as a Predecessor of RWA
NFTs (non-fungible tokens) became a symbol of digital ownership, especially in art and collectibles. However, it soon became clear that owning an NFT does not mean owning the object — whether a painting, music, or video. It is a digital certificate without legal force.
RWA repeats the same mistake, but in a more serious sphere — real estate, finance, property rights. Token ≠ right, and until this changes, RWA remains in the same category as NFTs: a digital marker without legal backing.
6. Lack of Investor Protection: Risks Ignored
No Legal Responsibility
Most RWA projects operate outside the regulated field. This means that:
- In the event of platform bankruptcy, the investor has no claim to the real asset.
- There is no mechanism for refund or compensation.
- No institution guarantees compliance with tokenization conditions.
Example: In 2023, the project Freeway, which promised returns from tokenized assets, suddenly froze withdrawals. Investors lost millions of dollars, and legal protection was absent — the tokens were not recognized as financial instruments.
Counterparty Risks
Even if the asset exists, it may be:
- Pledged to a bank.
- The subject of a legal dispute.
- Managed by an unreliable company.
An investor owning a token has no access to the legal status of the asset and cannot influence its fate.
7. Technological Shell Without Substance
Blockchain ≠ Guarantee
Many projects use blockchain as an argument for reliability: “everything is transparent, everything is recorded.” However:
- Blockchain is only a method of data storage, not proof of its authenticity.
- If false information is recorded on the blockchain, it will remain there forever.
- Without external verification (audit, notarial confirmation, legal registration), it is just digital noise.
Example: The project Propy claims to sell real estate through NFTs. However, buying an NFT does not mean automatic transfer of property rights — it requires a separate legal procedure, outside the blockchain.
8. Geography and Legislation: Where RWA Has a Chance
Countries with Progressive Regulation
Some jurisdictions are making steps toward recognizing tokens:
- Switzerland: has recognized tokens as securities but not as a form of real estate ownership.
- Singapore: regulates tokenized assets as financial instruments but with restrictions.
- UAE: is actively developing a legal framework for digital assets, including RWA.
However, even in these countries:
- Real estate tokenization requires separate legal arrangements.
- The investor does not receive automatic rights — only through an intermediary.
- Legislation remains fragmented and unstable.
9. Economic Motivation: Why Promote RWA?
New Markets, New Fees
The tokenization of real-world assets creates new financial products that can be sold, exchanged, and used in DeFi. This allows:
- Charging fees for token issuance.
- Creating secondary markets.
- Attracting investment without transferring real rights.
For platforms, this is a way to monetize assets without giving up control, while for investors it is often a trap where promises do not match reality.
Attracting Retail Investors
RWA projects actively target unqualified investors, promising access to previously inaccessible assets: real estate, bonds, gold. This creates the illusion of financial democratization, but in reality:
- The investor receives a token without legal rights.
- Risks are not properly disclosed.
- Refund is impossible in case of problems.
10. Possible Development Scenarios
Scenario 1: Collapse of Trust
If a major RWA project collapses, as happened with Terra or FTX, this could trigger a massive loss of trust in real-world asset tokenization. Especially if it turns out that assets did not exist or were inaccessible.
Scenario 2: Regulatory Recognition
A scenario is possible in which states begin integrating blockchain into legal registries. This will require:
- Adoption of new laws.
- Creation of digital cadasters.
- Recognition of tokens as a form of ownership.
But this is a long and complex path, requiring political will and technological maturity.
Scenario 3: Limited Application
The most realistic scenario is limited use of RWA in the institutional environment, where tokens are used for accounting, settlements, hedging, but not as a form of ownership. This is infrastructure, not revolution.
Conclusion
RWA is not a scam by definition, but in its current form it is a high-risk, legally unprotected, and often manipulative model, especially for retail investors. Without recognition of tokens as a form of ownership, without integration with state registries, and without transparent regulation, it remains a digital shell that does not grant real rights.
Investors should approach RWA with maximum caution, considering tokens not as assets but as derivatives, whose value depends on the good faith of the issuer and the legal environment.
