Tokenization's $140 Trillion Problem

The Tokenized Asset Coalition's Industry Veteran Series publishes perspectives from experts on various topics impacting tokenized assets. Our goal is to surface the most important ideas that will drive the industry forward. None of these perspectives should ever be construed as giving investment, legal or financial advice.

"The architecture choices being locked in right now will determine for the next decade whether the $140 trillion of fiduciary-managed wealth shows up or stays on the sidelines."

Tokenized real-world assets are the most promising development in financial infrastructure in twenty years. They are also, right now, almost impossible for a Registered Investment Adviser to allocate to in any meaningful way. Both of those statements are true, and the gap between them is the most important problem the tokenization industry is not yet seriously trying to solve.

I run an SEC-Registered Investment Adviser that exists for exactly this moment. Protocol Wealth was built crypto-native, with three managing partners who came to this from traditional wealth management, institutional portfolio construction, and security infrastructure. We serve crypto protocol treasuries, founders, and ultra-high-net-worth onchain investors. We get pitched on tokenized RWAs almost every week.

And we don't allocate. Not beyond a small tokenized-Treasury sleeve. Not because we are skeptical of tokenization. We taught this for six years before launching the firm. Not because our clients lack appetite. They have plenty. We don't allocate because the tokenization industry, for all its talk about tearing down the walls of traditional finance, is busy building new ones. Higher walls. More of them. And every platform is trying to put itself inside its own.

This piece is not a takedown. It is the case for why the next phase of tokenization has to be different, and why getting it different is more important than the industry seems to recognize. The $140 trillion of wealth that sits with RIAs, retirement plans, and institutional advisers is not going to allocate to something it cannot operationally use. And the industry's current path leads not just to RIAs being excluded. It leads to tokenization stalling at the level of the same people who already had wallets in 2024.

The original promise has been quietly abandoned

Walk the tokenization conference circuit and you will hear the same pitches you heard five years ago. Tokenization unlocks the long tail. Tokenization brings smaller, well-performing managers into the capital markets. Tokenization gives the regional real estate developer, the niche private credit fund, the agricultural lender, the energy operator, and the specialty finance shop access to capital they cannot reach through traditional distribution channels. Tokenization democratizes who gets to manage other people's money, and tokenization democratizes who gets to invest in the strategies that have historically been gated by minimums, accreditation hurdles, and closed networks of placement agents.

That is the right pitch. It is the only pitch that justifies the regulatory complexity, the smart contract risk, the operational lift, and the capital that has gone into building this industry. The people I work with (the founders, the protocol treasuries, the UHNW onchain investors) get this immediately. They have spent the last few years watching DeFi protocols generate yields that are economically interesting but structurally precarious. They want exposure to the real economy, through fiduciary management, in the wrapper of an asset class they can think about clearly.

What they are being offered instead is a tokenized version of the BlackRock USD Institutional Digital Liquidity Fund. They are being offered tokenized share classes of Apollo's Diversified Credit Fund, Hamilton Lane's Senior Credit Opportunities, KKR's strategies, VanEck's Treasury bill product. These are real funds, run by real institutions, holding real assets. None of that is in question.

What is in question is whether tokenizing them advances the original case for tokenization at all. BlackRock funds, Apollo funds, Hamilton Lane funds, and KKR funds are not assets that lacked distribution. They are not strategies that needed blockchain rails to find capital. An RIA who wants exposure to Apollo private credit can already get it through a feeder fund, an interval fund, or, if the client qualifies, direct LP interests. Schwab, Fidelity, Pershing, and the other major custodians have offered access to these strategies for years. Tokenizing them does not unlock new managers or new investors. It is a UI upgrade for the existing distribution channel, dressed up as a paradigm shift.

This is the quiet drift that almost nobody in tokenization wants to name out loud. The original promise was about expanding the universe of managers who could compete for capital. The reality has become a premium digital wrapper for the trillion-dollar managers who already had every distribution channel they needed. I have spoken with senior leaders at the largest tokenization platforms, and the message is consistent: they are pursuing the trillion-dollar shops because the trillion-dollar shops bring scale and credibility. Which is rational at the firm level. It is also a strategic dead end at the industry level. The durable case for tokenization, the one that justifies trillions in onchain assets a decade from now, is not about giving wallet-based investors access to BlackRock. It is about giving them access to the manager they could never have reached otherwise.

The industry has stopped trying to do the harder thing. And in doing so, it has built a market that an RIA like mine has very little reason to participate in.

What we would actually allocate to

Before getting to the operational reasons we still cannot allocate, it is worth being explicit about what we want, because the platforms that approach us almost never start there.

We are looking for diversified, fiduciary-managed exposure to assets that are otherwise hard for our clients to access. Tokenized regional real estate from operators with track records and underwriting we can diligence. Tokenized private credit from smaller specialty lenders: receivables financing, equipment finance, royalty-backed credit, agricultural credit. Tokenized energy and royalty interests structured properly. Tokenized invoice and trade finance. Tokenized litigation finance, music royalties, insurance-linked securities. The asset classes where the underlying economics are interesting precisely because the existing distribution machinery cannot reach them efficiently.

We are not looking for a tokenized version of a fund our clients can buy through any prime broker. We are not looking to take on smart contract risk and oracle risk and bridge risk to access something we could access without any of that. We are not looking for DeFi yield for its own sake. We are looking for differentiated real-economy exposure, packaged in a way a fiduciary can defend in a compliance review and explain to a client.

The strategic case for that exposure, at the client portfolio level, is straightforward. Most client portfolios are equities and bonds. Maybe a sleeve of public REITs. Private equity, private credit, hedge funds, insurance-linked securities, oil and gas, agricultural credit, infrastructure. These are the asset classes that institutional allocators have used for decades to build portfolios that produce better risk-adjusted returns than 60/40. The barrier for most client portfolios has always been the same five things: minimums that exclude all but the largest accounts, accreditation thresholds that exclude most retail investors, illiquidity that locks capital up for years, opacity that prevents real diligence, and operational lift that consumes more advisor time than the position justifies. Tokenization is potentially the technology that addresses all five of those at once. Smaller minimums. Programmatic access. Real liquidity. Onchain transparency. Composability into existing reporting and custody infrastructure. That is the actual case for why a fiduciary cares about this category. Not the yield. The access, to investments most clients have never been able to hold, in a structure that makes those investments operationally tractable for the first time.

This is not a fringe ask. It is the entire reason an institutional channel exists at all. RIAs and the platforms behind us (endowments, foundations, retirement plans, the family-office complex) are paid to find exposures that do not show up in a 60/40 portfolio. We are paid to do the diligence on smaller managers. We are paid to take on operational complexity in exchange for return premiums and diversification. The platforms approaching us about tokenizing the BlackRock fund are talking to the wrong audience.

Our job is not to chase yield. It is to understand a specific client's situation and build a financial life around it that holds up. Sometimes that means yield. Often it means cash flow, tax efficiency, estate structure, risk dampening, or operational simplicity. If a client needs income from an investment to pay tuition or a mortgage, I cannot put them in a tokenized product that "earns yield" through rebasing. There is no cash. The yield exists; the dollars do not. We are paid for fit, not for maximization. We are also paid to not lose money, to report regularly, to remain compliant, to not take custody, and to do diligence the project's own marketing materials rarely contain. Tokenization, done well, expands the set of things we can fit into a client's life. Tokenization, done as it currently is, mostly doesn't.

When the industry is ready to put real long-tail managers onchain, with fiduciary-grade infrastructure around them, we will allocate. Today, the products that exist do not look like that. So we don't.

Five things keeping us out

If the products were what they should be, would the operational infrastructure support allocation? No, and I want to be specific about why, because each of these is fixable, and because the fixes do not require the industry to abandon what it has built. They require the industry to finish building it.

One: there is no single qualified-custodian path. The SEC custody rule is not optional. Any RIA exercising discretionary authority is required to safeguard client assets at a qualified custodian: a federally chartered bank, a state-chartered trust company, a registered broker-dealer, or one of the narrow other categories the rule defines. For tokenized RWAs, that practically means Anchorage Digital Bank (the only OCC-chartered crypto bank), BitGo Trust, Coinbase Custody, or a partnership arrangement with a state trust. Each of those custodians supports some tokenized products and not others. Anchorage is deepest with the Securitize-issued products. BitGo covers the broadest sweep of tokens but the institutional fund coverage is uneven. Coinbase has its own gaps. An RIA building a multi-issuer tokenized RWA sleeve has to maintain multiple custodial relationships, multiple operational workflows, and multiple sets of statements, with no single platform offering coverage of the asset universe a fiduciary should reasonably want exposure to. This is not a feature of a maturing industry. It is a tax on allocation, and the tax is high enough that allocating beyond a single-custodian sleeve becomes operationally indefensible.

It is also worth noting that the regulatory framework itself is in motion. The SEC's 2025-2026 Regulatory Agenda explicitly contemplates custody-rule modernization for digital assets, and the SEC-CFTC Memorandum of Understanding signed in March 2026 commits both agencies to exploring alternative compliance frameworks. The most substantive specific proposal I have seen is the March 23 letter to the SEC and CFTC from Veda Tech Labs, which argues for recognizing certain non-custodial smart-contract vault architectures as satisfying the custody rule's core safeguarding objectives when defined structural guardrails are in place. The argument is conceptually compelling: the rule has a purpose (preventing misappropriation, commingling, and insolvency exposure) and a mechanism (require a qualified custodian), and the same purpose can be achieved through a different mechanism for digital assets. We are not in a position to endorse the specific seven-guardrail formulation, since the SEC's final position is unresolved and a fiduciary in our position needs to stay flexible. But the broader principle, that self-custody with the right structural and policy-based guardrails should be a legitimate compliance pathway for digital asset management, is worth taking seriously, and we think the modernization conversation is overdue. RWAs and self-custody structures with policy-based guardrails are, in our view, a natural progression of the technology rather than a deviation from the safeguards the rule is designed to provide.

Two: the token-to-asset data tying is opaque exactly where fiduciaries need it most. This is the barrier I would hit hardest in a room full of platform CEOs. Tokenization's headline promise is transparency. In practice, tying a specific token to a specific underlying asset, with current data on that asset, is reliable for some products and broken for others. For a tokenized Treasury fund the data is fine. The underlying is homogeneous, the NAV is calculated by an established fund administrator, and the oracle just publishes a daily number. For tokenized private credit, tokenized real estate, and tokenized energy, the data trail breaks down at the layer that matters. What loans are actually in the pool? What is the current loss reserve? What did this property appraise at last quarter? What is the production curve on this royalty? Who are the borrowers, and what is the concentration profile? This is the data an institutional allocator needs to underwrite a position, and it is the data we get reliably for traditional private fund investments through quarterly investor letters and audited financials. For most tokenized products, that data is either not available, available only on a delayed and aggregated basis, or available behind a portal that does not connect to anything else we use. The industry has built impressive infrastructure for posting NAV. It has built almost nothing for posting the asset-level data that NAV is supposed to summarize. Until that gap closes, the tokens we are being offered are operationally a black box, and a fiduciary cannot allocate into a black box at scale no matter how attractive the headline yield.

Three: KYC and onboarding are fragmented across every issuer. Each tokenization platform requires its own KYC, its own accreditation attestation, its own onboarding portal, its own legal documentation, and its own sign-off process. To allocate across five issuers, we onboard each client five separate times, on five separate platforms, into five separate compliance workflows. Securitize iD has gotten close to a passport for the Securitize-issued universe. It does not extend to Superstate, to Ondo, to Franklin Templeton's Benji, to WisdomTree, to Plume's vaults, to Centrifuge, or to any of the others. There is no shared accreditation registry. There is no federated KYC standard the industry has agreed on. Every platform has chosen to be its own onboarding silo, and the cumulative operational burden of allocating across the universe is high enough that platforms are effectively competing on whose silo we are willing to fully integrate into. That is not how a fiduciary thinks about allocation. We do not pick one platform; we pick the best manager for each exposure. The current architecture penalizes us for doing that.

Four: reporting does not exist for our world. Black Diamond, Orion, Tamarac, and Addepar are the operating systems of the RIA industry. Quarterly client statements, performance attribution, cost-basis tracking, tax-lot accounting, GIPS-compliant performance presentation, household-level rollups. These are not optional. They are the basic operational infrastructure of fiduciary advice. None of the major tokenization platforms ships with native integration to any of those systems. Some have built bilateral integrations through Anchorage or Onramp, which helps. None has solved the full problem. Every RIA looking at this market has to either custom-build a reconciliation pipeline, accept that tokenized positions live outside the household reporting view, or refuse to allocate. I will note that this is the one barrier I expect to soften meaningfully over the next twelve to eighteen months, because it is the most amenable to AI. The work of pulling onchain position data, normalizing it against fund-administrator records, computing performance attribution, and pushing it into a portfolio reporting system is exactly the kind of work that AI agents are going to dramatically reduce the cost of solving. So this barrier will probably solve itself. That is also why the other four matter more: they are the ones that actually require the industry to act.

Five: there is no standard for income delivery. Yield from tokenized RWAs reaches the holder in at least four different ways. Some tokens accumulate yield by raising the price per token (USTB, OUSG accumulating). Some rebase by minting new tokens daily into the holder's wallet (rOUSG, BUIDL, BENJI). Some pay yield in stablecoins on a schedule (some private credit and real estate tokens). Some pay nothing until maturity, with capital and yield returned through a redemption event (most hold-to-maturity credit pools). Across a single client portfolio, that creates four different tax treatments, four different reporting workflows, and four different cost-basis tracking problems. There is no industry standard. There is not even a serious conversation about what one should look like. A fiduciary managing a household across multiple tokenized positions cannot rely on any consistent expectation of how income arrives, when it is taxable, or how it gets reflected on a client statement. This is a problem the industry could solve in a year if it wanted to. It has not, because the platforms have all chosen the income mechanism that is operationally easiest for them to deliver, with no coordination.

These five barriers are why a crypto-native RIA with strong client demand still cannot allocate beyond a tokenized Treasury sleeve. None of them is technologically intractable. All of them require the industry to build infrastructure that crosses platform boundaries instead of deepening platform stacks. That is a different kind of work than what the platforms have been doing.

None of this is to say the industry is idle. Real work is being done at the data, custody, and issuance layers. The problem is that almost all of it is being built inside individual platform stacks rather than as shared infrastructure. In TradFi, silos compete on top of neutral layers below them: DTCC, NSCC, FIX, the CUSIP, the 1099. In tokenization, the silos are racing to absorb the layer below them. There is no shared CUSIP for tokenized assets. No federated KYC. No common transfer agent registry. Each platform is building its own, and whichever version becomes dominant becomes the de facto silo everyone else has to integrate into. The standards conversation is overdue.

DeFi needs RWAs more than RWAs need DeFi

The strategic case for fixing this is bigger than the RIA channel.

DeFi yields, in their current form, are not a durable equilibrium. The yields exist because of risk: smart contract risk, oracle risk, bridge risk, liquidation risk, the residual risk of a market still less than ten years old. As the security of these systems improves, and it is improving, the risk premium that has compensated allocators for tolerating those risks is going to compress. Either the security gets so good that the premium goes away on its own, or the premium stays elevated only because institutions stay away, which means yield falls anyway, because the marginal lender becomes smaller and more risk-tolerant. Either path leads to the same destination. DeFi-yield-for-its-own-sake is a transitional state, not a destination.

The destination, if there is one, is DeFi as a programmable layer on top of real-world assets. RWAs become the stable, yield-bearing collateral that backs onchain lending, the way Treasuries back the repo market in TradFi. The lending markets get cheaper because the collateral is genuinely investment-grade and genuinely transparent. The borrowing markets get cheaper because the lenders no longer require a crypto-risk premium. The composability that DeFi has spent five years building becomes useful at the scale that justifies the engineering, because the assets it composes over are real economic claims rather than reflexive token markets.

This is not a controversial vision. It is roughly what every senior person at every serious DeFi protocol will tell you they are building toward, if you ask them in private. The model requires real-world assets at scale. Not BlackRock-sized real-world assets, which are already efficiently financed in TradFi at lower cost than DeFi can deliver. The smaller, well-performing managers. The long tail. The exact same managers tokenization was originally supposed to bring onchain.

Which is the punchline of this whole piece. The RIA channel and the DeFi channel need the same thing from tokenization. They need it for different reasons. RIAs need long-tail managers because that is what fiduciary diversification looks like. DeFi needs long-tail managers because that is what stable collateral at scale looks like. The current path of the tokenization industry, tokenizing trillion-dollar funds and building inside single-platform silos, serves neither channel. It serves the existing crypto-native pool of accredited individuals who were already buying these strategies through other channels and now can buy them with marginally better UX.

That is not a market. That is a feature ship.

The path forward is the same one in both cases. Build for fiduciaries. Build shared infrastructure across platforms. Build for the long tail of managers who actually need new capital, not the ones who already have it. The industry has the talent, the capital, and the regulatory tailwind to do this. What it is missing, today, is the recognition that doing it differently is not a favor to RIAs or to DeFi protocols. It is the only path that turns tokenization into the trillion-dollar industry every analyst report keeps projecting it to be.

What we want, and where we are

I will close the way I would close a partnership conversation, because that is what this piece is. Protocol Wealth wants to allocate. We have the clients, the operational discipline, the regulatory standing, and the conviction. We are the customer the tokenization industry says it is building for. We can be (and want to be) partners to the platforms, the data infrastructure providers, the custodians, and the issuers who are willing to build this differently.

What we need is straightforward. A federated KYC and accreditation standard recognized across issuers. A single qualified-custodian path with full asset coverage, or a small enough number of paths that a multi-custodian operation is practical. A token-to-asset data standard built on something neutral: RedStone-style oracle infrastructure that is not commercially trapped inside one platform's stack. An income-delivery standard. And, eventually, native reporting integrations or AI-mediated reconciliation into the four major RIA reporting platforms.

If you are building any of that, we are interested. Not because we are doing you a favor by being interested, but because the gap between what you are building and what fiduciaries actually need is the gap between tokenization being a niche and tokenization being an industry. The architecture choices being locked in right now will determine for the next decade whether the $140 trillion of fiduciary-managed wealth shows up or stays on the sidelines.

We are not skeptics. We are not standing outside the industry warning it about itself. We are inside it, watching it make choices that exclude us, saying so out loud while the architecture can still bend.

Adam Blumberg is Managing Partner at Protocol Wealth LLC, an SEC-Registered Investment Adviser (#335298) serving crypto protocols, founders, and ultra-high-net-worth onchain investors. He is a Certified Financial Planner, co-founded the Certified Digital Asset Advisor designation, and managed Wealth Management Day at Consensus 2026. Protocol Wealth operates under a fiduciary standard and does not take custody of client assets. He can be reached at info@protocolwealthllc.com.

This piece reflects the views of its author and Protocol Wealth LLC. It is not investment advice. Mention of specific firms reflects publicly available information and is provided as illustration of industry patterns.