Opinion: Vincent Kadar, Polymath CEO
When a company tokenized and sold shares in dozens of Detroit homes it didn’t actually own, it was more than just a real estate scandal. This served as a warning to the entire Real World Assets (RWA) sector.
The deal seemed modern, with blockchain tokens, fractional ownership, and the promise of rental income.
However, in reality, many of the properties were vacant, in poor condition, or legally unsaleable.
The blockchain recorded all token transfers smoothly. It lacked the necessary checks to ensure that the assets were genuine and were generating income.
Sector-wide risks
This is what happens when innovation outpaces surveillance. Tokenization enables efficiency, liquidity, and broader market access. Without proper protection, long-standing problems can also become worse.
Although the Detroit case focused on real estate, the same vulnerability exists for all categories of RWAs. Tokenized bonds have no value unless cash flows are secured. Tokenized goods have no value if the underlying assets are not stored and verified. Without these protections, the entire process becomes a house in the sand.
Tokenization does not guarantee transparency, enforcement, or investor protection. This accelerates trading, allowing malicious parties to act as quickly as legitimate market participants. In the case of traditional markets, it is easy to think that the solution is to pause and reconsider the value of tokenization.
Related: What is Tokenomics? A Beginner’s Guide to Cryptocurrency Supply and Demand
The answer is to not delay the adoption of tokenization. Instead, the solution is to build a system with trust at its core. That way, bad actors can’t hide and the risk of fraud is significantly reduced.
Ecosystem of trust
When tokenization enters traditional markets, it must follow guidelines that promote market trust. Transactions should only involve verified participants, and ownership should be connected to verified identities rather than anonymous wallet addresses. Transaction rules need to be built into the technology, such as who can buy, when they can sell, and on what terms. That way no one can bypass them.
Governance is equally essential. Markets need transparent processes to resolve disputes, recover emergency assets, and safely upgrade systems. These are not optional features.
They are needed if tokenized assets are to attract long-term institutional participation.
When compliance, governance, and security are built into the foundation, investors and regulators know the systems are designed to protect them. Without that trust, even the most cutting-edge technology will struggle to achieve lasting adoption.
Opportunities in emerging markets
This challenge is not unique to advanced financial centers. In emerging markets, access to capital is complicated and expensive due to older infrastructure. Tokenization helps solve these problems. This enables the creation of digital, flexible and globally connected markets.
Many economies in these regions already have high mobile usage rates. Demand and interest in investing in digital assets is also increasing. These factors make now the perfect time for tokenization.
Without compliance with local regulations and strong investor protection, this opportunity could be lost. Achieve new growth by building a compliant, globally compatible infrastructure from the beginning. It could also prevent flaws that have hampered traditional finance in these regions, such as vague ownership records, slow cross-border payments, high corruption risks, and weak investor protection.
This can be achieved by embedding transparency and secure governance directly into market infrastructure.
Responsible growth, not hype
Some projects are already moving in the right direction. They use permissioned blockchains designed for regulated assets, employ token standards that automatically enforce compliance, and work with trusted custodians to protect the underlying assets. These are not added later. These are the protections that make tokenization markets in sectors such as commodities, private credit, and real estate reliable for global capital markets.
The possibilities for real-world assets are vast. This sector has the potential to unlock trillions of dollars in value, make markets more inclusive, and increase the efficiency of asset issuance and trading. Without proper guardrails, the industry risks eroding trust before it matures.
Priority should not be based on who can boot first. The real test will be who can build a system that will withstand decades of surveillance. Frameworks don’t hinder progress.
They are what make progress sustainable.
The choices you make today will determine whether tokenization delivers on its promise or becomes another missed opportunity.
Commenter: Vincent Kadar, Polymath CEO.
This article is for general informational purposes only and is not intended to be, and should not be taken as, legal or investment advice. The views, ideas, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.