The Future of Tokenized RWAs: The Battle Between Centralized Finance, Decentralized Blockchains, and Regulation

The financial world is standing at the precipice of a massive transformation—one that could redefine who controls global wealth, how assets are traded, and who gets access to the financial system. The driving force? Tokenized Real-World Assets (RWAs).

But there’s a problem: Regulations, centralization, and the battle between permissionless and permissioned blockchains.

At the center of this battle are financial giants like BlackRock, Franklin Templeton, and State Street, which see tokenization as the next frontier. But they face a paradox: They want the efficiency and global liquidity of decentralized blockchains, yet they cannot legally operate without regulatory controls like KYC, AML, and accredited investor restrictions.

This creates a fundamental tension between fully decentralized, permissionless tokenization (the crypto vision) and centralized, regulated tokenized finance (the BlackRock vision).

In this blog post, we’ll explore:

• The promise of tokenized RWAs
• The challenges BlackRock and traditional finance face in launching them
• The battle between decentralized and centralized blockchains
• The role of regulation
• The likely path forward

The Promise of Tokenized RWAs

Why BlackRock and Institutions Want Tokenization

Tokenized RWAs—stocks, bonds, real estate, ETFs, treasuries—offer:

• 24/7 Global Trading: Unlike traditional markets, which operate only during set hours, tokenized assets can trade anytime, anywhere.
• Borderless Finance: Tokenized RWAs could be accessible to anyone with a smartphone, bypassing restrictions based on nationality or banking status.
• Instant Settlement: On a blockchain, assets can settle within seconds, not days, reducing counterparty risk and inefficiencies.
• Fractional Ownership: Tokenized assets allow for micro-investing, where users can buy tiny fractions of stocks, bonds, or ETFs—something nearly impossible in traditional finance.
• Programmability & DeFi Integration: Unlike traditional finance, tokenized RWAs could integrate directly into DeFi lending, yield farming, and derivatives, unlocking new liquidity sources.

This is the dream of BlackRock, Vanguard, and Franklin Templeton—to tokenize stocks, ETFs, bonds, and treasuries and sell them to every investor on the planet.

But here’s where they hit a roadblock.

The Roadblocks: Why BlackRock Can’t Freely Tokenize RWAs Yet

1. KYC, AML & Securities Laws Financial laws demand that securities (stocks, ETFs, and tokenized RWAs) can only be sold to verified investors under strict compliance rules:
   • Anyone, anywhere cannot legally buy tokenized securities due to KYC laws.
   • SEC & EU regulations require that all securities are issued through authorized intermediaries.
   • Retail investors cannot access tokenized private markets without accreditation.
   • If a tokenized stock is freely tradable, it breaks securities laws.
   This is why BlackRock’s BUIDL tokenized fund is locked behind Securitize’s permissioned system—only approved investors can buy it.
2. The Conflict Between Decentralization and Compliance The crypto model (Bitcoin, Ethereum, DeFi) is permissionless, open, censorship-resistant—anyone can trade assets without approval. But traditional finance is built on control, regulation, and intermediaries.
   • If BlackRock tokenized stocks and ETFs on a public blockchain like Ethereum, they could be bought by anyone—including sanctioned countries or illicit actors.
   • Current laws require BlackRock to track ownership and prevent unauthorized trading—which is impossible on a permissionless blockchain.
   • BlackRock cannot legally issue securities that regulators cannot control.
   Thus, tokenized RWAs must be issued on centralized, permissioned blockchains like Securitize, not open blockchains like Ethereum or Solana.
3. Securities Laws Prevent Free Trading of Tokenized Stocks & ETFs
   • In U.S. and EU law, tokenized stocks and ETFs are considered securities and must be sold through regulated brokers and exchanges.
   • These laws prevent the creation of a fully permissionless financial system.
   • Traditional ETFs require intermediaries (authorized participants, market makers, brokers, etc.)—meaning BlackRock cannot just tokenize an ETF and allow anyone to buy it like Bitcoin.
   This is why BUIDL, BlackRock’s first tokenized money market fund, cannot be freely traded.

The Three Possible Futures for Tokenized RWAs

Because of these barriers, there are three potential paths forward:

1. The Centralized BlackRock Model: Regulated Tokenized RWAs BlackRock, Vanguard, Franklin Templeton, and other institutions will continue pushing regulated tokenized assets, but:
   • They will be on permissioned blockchains (like Securitize, Polygon, or Avalanche’s institutional layer).
   • Retail investors will need KYC and approvals to participate.
   • There will be restrictions on trading, just like traditional finance.
   • DeFi integration will be limited to “regulated DeFi” with whitelisted participants.
   This is the most likely path forward in the next 5 years—BlackRock will slowly expand access but maintain regulatory control.
2. The Crypto-Native Model: Fully Permissionless RWAs In this model, tokenized stocks, ETFs, bonds, and treasuries exist freely on decentralized blockchains, where:
   • Anyone can trade assets permissionlessly—no KYC, no restrictions.
   • Securities exist purely on-chain, backed by smart contracts.
   • Traditional finance loses its monopoly as anyone can issue tokenized RWAs.
   But this is currently illegal in most jurisdictions. The only way this happens is if DeFi grows so large that governments are forced to adapt or if a jurisdiction (e.g., Dubai, El Salvador, or Singapore) allows it first.
3. The Hybrid Model: Permissioned DeFi This model is a compromise:
   • Institutions tokenize assets on regulated blockchains but allow limited permissionless trading.
   • Investors still undergo KYC but can trade freely within a controlled system.
   • A mix of traditional finance and decentralized blockchain models.
   This is likely to emerge first in crypto-friendly jurisdictions before spreading globally.

The Geopolitical Stakes: Why This Battle Matters

Whoever controls the future of tokenized RWAs will control the future of finance.

• If BlackRock succeeds in making tokenized ETFs fully global, it will dominate global finance like never before.
• If permissionless DeFi wins, power shifts from governments and banks to decentralized communities.
• If regulators maintain control, the financial system remains mostly closed, with slow improvements over time.

This is why governments, regulators, crypto developers, and financial giants are all fighting over tokenization.

Conclusion: The Coming Financial Revolution

Tokenized RWAs are inevitable—but the battle over who controls them is just beginning.

• Will BlackRock and Vanguard centralize tokenized assets behind KYC-controlled permissioned blockchains?
• Will decentralized finance allow anyone in the world to trade stocks, bonds, and ETFs freely?
• Will regulators allow a hybrid model where tokenized RWAs can interact with DeFi?

The next 5–10 years will determine whether the world gets a truly open financial system—or a centralized, permissioned version of tokenization controlled by a few powerful institutions.

Who do you think will win? Let me know in the comments.

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• The Dark Side of Tokenized Real-World Assets: A Threat to Crypto’s Core Ethos
• Gold vs. Bitcoin: The Overlooked Advantage of Physical & Digital Coexistence
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• How Michael Saylor, MicroStrategy, and BlackRock Could Choose the Next Bitcoin Fork
• Tokenized Gold and the Future of Money: How Private Blockchains Could Redefine Finance and Geopolitics