Final up to date on June 1st, 2026 at 12:20 pm
Tokenization is commonly offered as a breakthrough that might unlock liquidity throughout a variety of historically illiquid property. The idea of tokenization is easy: convert property like actual property, non-public credit score, or collectibles into digital tokens, making them simpler to entry and commerce on-chain.
This innovation has pushed sturdy industry-wide curiosity over time, with extra asset courses being introduced on-chain as a part of a broader push towards digital finance.
Nevertheless, key {industry} stakeholders like Oya Celiktemur, EMEA Gross sales Director at Ondo Finance, have spotlighted some gaps. Throughout Paris Blockchain Week 2026, Celiktemur famous that there’s nonetheless a widespread misunderstanding that tokenization alone could make illiquid property simple to commerce.
So, are expectations round asset tokenization’s impression on market liquidity being overstated?
The place Tokenization Really Works Properly
Tokenization creates essentially the most significant impression in markets that have already got energetic participation and constant demand, however are held again by sluggish infrastructure, excessive transaction prices, or restricted entry pathways. In these environments, liquidity will not be the principle problem; execution and settlement effectivity are.
Slightly than creating new consumers or sellers, asset tokenization improves how present markets function. It upgrades the underlying infrastructure that connects members, making buying and selling processes extra direct and fewer depending on a number of layers of intermediaries.
The place it provides essentially the most worth
That is most seen in conventional monetary markets comparable to authorities bonds, publicly traded equities, ETFs, and huge institutional asset swimming pools. These are markets the place capital is already energetic and repeatedly shifting, however the place settlement techniques, reconciliation processes, and cross-border constraints nonetheless depend on legacy frameworks.
In these circumstances, tokenization helps shorten settlement timelines, scale back operational friction, and enhance entry to fractional possession the place it’s sensible. It will possibly additionally simplify how property are recorded and transferred throughout techniques, decreasing administrative overhead for establishments managing massive volumes.
The important thing final result is improved market effectivity. Belongings transfer by way of the system quicker, prices are decreased, and participation turns into simpler, however the underlying liquidity will not be newly created. It’s merely made extra usable and extra effectively distributed.
The place Tokenization Falls Quick
In line with Oya Celiktemur, EMEA Gross sales Director for Ondo Finance:
“I feel there’s nonetheless this concept that tokenizing one thing illiquid will one way or the other magically make it a liquid asset, which is simply not true”. She added that property like actual property and personal credit score “had been by no means that liquid” to start with.”
Francesco Ranieri Fabracci, head of tokenization growth at Tether, echoed the same view.
“It’s not that for those who put an asset onchain, it is going to be liquid,” he stated, arguing that solely a narrower set of devices, together with bonds, cash market funds and stablecoins, are prone to obtain constant liquidity in tokenized markets.”
In these circumstances, placing an asset on-chain might make it simpler to symbolize or switch, nevertheless it doesn’t clear up the deeper problem: there merely aren’t sufficient energetic members keen to commerce it at scale.
Belongings with inherently weak or inconsistent demand:
This consists of ultra-niche non-public funding alternatives which are enticing solely to a really restricted circle of potential traders, in addition to very particular bodily property in the actual world, comparable to uncommon collectibles, custom-made merchandise, or privately negotiated investments. These property already discover it troublesome to draw consumers, even in conventional markets.
After they’ve been tokenized, these property often don’t endure a lot buying and selling within the secondary market. Whereas it could be technically potential to commerce these property, they not often see any buying and selling volumes, since there isn’t a stable or ongoing demand for them.
Generally, asset tokenization creates a misunderstanding of liquidity, which suggests {that a} sure asset turns into extra simply traded on account of its digital presence alone, quite than on account of its precise buying and selling.
Whereas tokenization would possibly assist higher symbolize and switch property, it can’t create the demand crucial for the creation of a practical and liquid market.
RELATED: High 10 High Use Instances of Asset Tokenization
Structural Limits That Tokenization Can’t Resolve
Even with improved expertise and on-chain entry, tokenization nonetheless runs into deep structural issues which are rooted in market economics.
Worth discovery difficulties
The shortage of energetic and steady buying and selling makes valuation extraordinarily subjective. With out ample buying and selling, there’s little worth discovery, which implies that the valuation will doubtless be guesswork. Tokenization would theoretically enhance buying and selling effectivity, however it could additionally improve mispricing dangers, notably when the markets are thinly traded, the place even a small commerce may impression the value.
Regulatory conflicts
Whereas tokenization supplies liquidity to an asset, it doesn’t alter the truth that the underlying asset stays topic to regulation inside real-life jurisdictions. Each authorized authority imposes its personal legal guidelines on who ought to be capable of buy, personal, or promote numerous property.
Such limitations can negatively impression the emergence of secondary markets in addition to the method of energetic buying and selling. On some events, an absence of readability relating to regulation can act as a barrier just like liquidity.
Insecure swimming pools of liquidity
The provision of liquidity sometimes concentrates round sure markets, making certain that pricing and change grow to be comparatively simple processes. By tokenizing an asset, such swimming pools of liquidity may very well be fragmented throughout a number of chains, exchanges, or issuers of tokens.
If liquidity is unfold throughout numerous areas quite than being concentrated in a single pool, every separate pool will probably be much less liquid, with increased worth slippage. The result’s a extra scattered ecosystem the place liquidity exists in principle however is much less efficient in observe.
Adoption limitations and problems with belief
Liquidity of an asset will not be solely decided by provide and demand but additionally is determined by problems with belief within the buying and selling system. Within the case of tokens, all three points have to be trusted: the token issuer, the market itself, and the laws that backs up the token.
If these parts are unfamiliar or lack confirmed credibility, traders could also be cautious. That is very true for institutional traders who usually tend to be happy solely when there’s regulatory certainty.
The Phantasm of “At all times-On Markets”
One of many extra missed claims relating to asset tokenization is that it fosters round the clock markets as a result of fixed operation of blockchain expertise. At first look, that is certainly a necessary enchancment over typical markets the place buying and selling can solely happen throughout designated hours.
Nevertheless, there’s a vital distinction between market accessibility and precise market exercise. Whereas blockchain techniques function on a 24/7 foundation, this doesn’t imply that members will have interaction in buying and selling, add liquidity, or successfully worth property. In different phrases, the system could also be up and working with out having the market itself being adequately liquid.
The true liquidity issue nonetheless depends on the next:
Market makers that continually give costs
Fixed involvement of the traders
Capital circulation that facilitates buying and selling processes
In any other case, even when tokens can at all times be purchased available on the market, they don’t have sufficient depth within the order guide.
What this implies is that there’s a slight false impression right here. As a result of buying and selling is at all times potential, individuals assume that liquidity should even be fixed. Nevertheless, what would possibly really exist is availability with out depth, and markets which are out there however not essentially working properly.
The confusion right here lies within the mixing up of technical uptime and liquidity. Whereas tokenization ensures that transactions occur at any time, this doesn’t essentially imply that there will probably be ample demand or provide available in the market.
In that sense, “always-on markets” are usually not mechanically liquid markets; they’re merely markets that by no means shut, even when participation is low.
RELATED: Is Tokenization All That It’s Cracked Up To Be?
What This Means for the Way forward for Tokenized Markets
As an alternative of specializing in its failures, the lesson from asset tokenization might very properly be considered one of altering our expectations on how market growth proceeds. Maybe the most important change right here is that the outcomes of any market exercise stay extra influenced by the underlying financial circumstances quite than any design options in expertise.
This means that the following wave of monetary tokenization might not see a generalized improve in liquidity for every type of property. Slightly, such actions would revolve round sure niches the place there’s already present participation and the place infrastructure positive aspects might be iteratively compounded.
On this respect, tokenization might develop into extra of a filtering course of, whereby some property show to naturally facilitate buying and selling environments whereas others don’t, regardless of their technological development.
It implies that the long run progress might not rely closely on the event of tokenization alone, however quite on recognizing the place it really resonates with market actuality.
Are Expectations Round Tokenization’s Affect on Market Liquidity Being Overstated?
Sure, however not as a result of tokenization lacks worth. The problem is that it’s typically anticipated to resolve liquidity issues in a uniform approach throughout very various kinds of property. In actuality, illiquidity isn’t a single, uniform downside. This may occasionally end result from low demand for the asset, lack of historic commerce expertise, or extra basic challenges related to how some forms of property are owned, valued, and traded. As these elements range, the consequences of tokenization will probably be inconsistently distributed primarily based on the particular market being focused.
Right here, assumptions differ drastically. For instance, if there’s a lot participation and buying and selling available in the market, the method of tokenizing the asset turns into far more efficient due to good mechanisms and decreased prices. However, if participation is low by definition, then making an asset a token doesn’t mechanically make buying and selling improve.
In the end, a very powerful false impression about asset tokenization is to treat it as a common repair for liquidity. In actuality, liquidity is created by taking part repeatedly, interacting with costs, and investing sources. The absence of those parts implies that tokenized markets can function completely properly technologically, however they’ll lack significant financial depth.
Disclaimer: This text is meant solely for informational functions and shouldn’t be thought-about buying and selling or funding recommendation. Nothing herein needs to be construed as monetary, authorized, or tax recommendation. Buying and selling or investing in cryptocurrencies carries a substantial danger of monetary loss. At all times conduct due diligence.
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