By Vladimir Tikhomirov, Co-Founder, Algebra

In 2026 so far, we’ve seen a lot of new momentum in tokenized securities and the ways in which many organizations explore their implementation and use cases. 

Robinhood, for example, reported a sharp fivefold increase in the value of tokenized RWAs on its network as well as trading activity in July. A little before that, Coinbase had announced its intention to launch 1:1-backed tokenized U.S. stocks. Even traditional financial institutions like Wells Fargo are introducing tokenized deposits and settlement capabilities. 

The progress is very clear there. But even with that said, I can’t help thinking that an important part of the equation is still missing from many market discussions. There’s a lot of talk around how to issue tokenized assets or how regulation around them should evolve. And yes, those are important topics in their own right — but they address what’s essentially only the first step in a much larger process. 

The more difficult challenge begins after an asset has been tokenized. A token without an active market to move in is simply a digital record; it does not have any real utility on its own. For tokenized securities to be truly considered a success, it’s not enough for them to simply live on-chain. They also have to be traded efficiently. 

Creating the Asset is the Easy Part 

Issuing a digital representation of an equity, bond, or fund is no longer a technical breakthrough. Tokenization mechanisms have been proven to work, and multiple providers can already make use of them. Regulation will take time, with different jurisdictions developing their own frameworks for digital assets, but it will also gradually catch up.  

The deeper problem here is that issuing tokenized assets does not automatically create a market for them. Even today, only a small share of tokenized real-world assets is actively used within DeFi. According to DeFiLlama, there are roughly $32 billion of RWAs on-chain, yet only about $3.9 billion is deployed in DeFi protocols — that’s around 12% of the total amount. The rest largely sits as digital representation without participating in financial markets. 

Traditional financial markets have spent many decades building the infrastructure that supports trading. Liquidity providers, market makers, clearing mechanisms, settlement systems — there are countless different elements that work together to make transactions predictable and efficient. And tokenized markets can’t skip those layers just because assets now live on-chain. 

Tokenized RWAs have the potential to truly thrive in global finance, but in order to get to that point, robust execution and proper market infrastructure are crucial. 

Liquidity is the Real Product 

One mistake I’ve often seen people make is assuming that, once enough assets become tokenized, liquidity will follow naturally. In reality, it only happens when market participants have confidence that they can transact safely and consistently. 

Institutional investors and large asset managers are particularly sensitive to this, because they need markets to maintain execution and pricing while handling significant trading volumes. Without that, tokenized assets would remain just an interesting bit of niche technology rather than something they can truly put their faith in and invest seriously. 

This is why the topic of liquidity deserves far more attention in my eyes. Institutional players won’t invest in this market seriously unless they see a promise of stability and security.  Which also brings me to the next point. 

Institutions Need Structure 

Besides liquidity, proper large-scale adoption will require trading environments that reflect regulatory realities. Public and permissionless access is generally considered a point of value with digital assets, but in institutional markets, participants have somewhat different needs. Specifically, they require defined regulatory boundaries, KYC procedures, whitelisting (where appropriate), ownership restrictions for certain asset classes, and compliance mechanisms that fit existing legal frameworks that these parties are already familiar with. 

Such requirements are often viewed as obstacles to innovation, seeing as the world of crypto and DeFi originally sought to move away from limitations of TradFi, and many fear repeating the same mistakes. But honestly, I don’t quite see it that way: DeFi has no need to copy everything about TradFi rules, but there is nothing wrong with being more realistic and recognizing what institutional players truly need. If anything, adjusting to those needs will be a plus for the industry, as it would allow institutions to participate with confidence and bring vastly more capital to the market. 

Fortunately, there are already standards that allow compliance requirements like investor eligibility or transfer restrictions to be applied directly into tokenized assets themselves. Instead of relying on intermediaries to enforce the rules, compliance can be a part of the assets’ underlying infrastructure while issuers retain control over who is authorized to participate. 

From the institutions’ point of view, this is advantageous, as they can be certain that only eligible parties can own and trade certain assets, and that rules are enforced consistently as part of the direct code within the digital assets. 

The future we’re moving towards is unlikely to end up in a stark choice between TradFi and DeFi. Instead, the next-gen financial ecosystem will combine both: blockchain efficiency on one side and the governance and operational standards that institutional investors already expect in traditional markets on the other. 

Programmable Markets Bring Opportunity 

Many people still think of tokenization as creating a digital version of an existing asset, but that’s only the tip of the iceberg. The real opportunity lies in making assets programmable. Digital assets can interact with one another in ways that are difficult — If not outright impossible — to achieve in traditional financial infrastructure. 

Imagine tokenized real estate automatically affecting related financial instruments as valuations change. Or digital ownership rights transferring automatically according to predefined legal events (like inheritance, for example). Or collateral structures where tokenized property rights can support investment into entirely different asset classes. 

All of these examples represent entirely new cases of market behavior, and they only become possible precisely because they’re built on top of programmable blockchain infrastructure. 

Looking some five-ten years ahead, I strongly suspect that we’re going to see entirely new categories of financial instruments. Things that we can hardly even imagine being tradable today — like energy capacity, or computing resources, or intellectual contributions — could one day become programmable financial assets to be exchanged naturally. 

As the evolution of tokenized assets continues, the key to success will be in creating the richest interactions between those assets and building an infrastructure capable of supporting a myriad of entirely new financial products.