Paper: Tokenize Everything, But Can You Sell It? RWA Liquidity Challenges and the Road Ahead
Authors: Rischan Mafrur
Date: August 3, 2025
Estimated Reading Time: 32 minutes
This paper analyzes why real-world asset (RWA) tokenization - despite rapid growth to over $25 billion in tokenized value - has not yet produced liquid markets. Drawing on on-chain data from RWA.xyz and case studies of tokenized real estate, private credit, and tokenized U.S. Treasuries, it finds that most RWA tokens exhibit low trading frequency, high ownership concentration, and minimal secondary market activity. The author attributes this illiquidity to structural barriers such as regulatory restrictions, valuation opacity, custodial concentration, and the absence of unified exchanges. Although the infrastructure for issuance is mature, market mechanisms for continuous trading are underdeveloped. The study proposes hybrid market structures, transparency standards, collateral-based liquidity, and regulatory modernization as pathways to address liquidity constraints and move tokenization from representation toward functional tradability.
Core insights
- Empirical liquidity gap. Across over $25 billion in tokenized RWAs, secondary trading remains limited. Most instruments, especially tokenized credit and treasuries, show sparse on-chain activity, with some assets changing hands only once per year.
- Market concentration. Tokenized U.S. Treasuries and private credit dominate issuance, but ownership is concentrated in few, often whitelisted, addresses. Commodity tokens like PAXG and XAUT are outliers with broader participation and higher turnover.
- Regulatory gating. Security classifications, accreditation rules, and whitelisting sharply constrain tradable supply. Many transfers require off-chain approval, converting nominally on-chain assets into permissioned systems with low velocity.
- Infrastructure imbalance. RWA platforms focus on primary issuance and custody rather than secondary trading. Absence of active market makers and fragmented venues prevents price discovery and sustained liquidity.
- Proposed remedies. The paper outlines liquidity solutions including hybrid centralized–decentralized markets, standardized valuation and disclosure, collateralization via DeFi lending, regulatory reform for broader investor access, and better analytics infrastructure.
The study begins by quantifying the growth and distribution of tokenized assets, noting that while private credit and U.S. Treasuries account for most value, these categories are largely static in trading behavior. The author contrasts this with commodity-backed tokens like PAXG that enjoy deeper liquidity due to exchange listings and global demand. This raises the question of whether tokenization itself can generate liquidity, or if it merely digitizes ownership without enhancing tradability.
The empirical analysis, using RWA.xyz and Etherscan data, highlights structural illiquidity: few active addresses, sporadic transfers, and short trading streaks across most RWA categories. The data show that market capitalization and transaction volume diverge significantly - tokens such as BUIDL have large notional value but fewer than 100 monthly transfers. This pattern suggests a buy-and-hold model rather than an active secondary market, reinforcing the view that technical tokenization alone cannot overcome legal and behavioral frictions.
In discussing the causes, the paper identifies regulatory classification as a binding constraint. Most RWAs are issued as securities, accessible only to accredited or KYC-verified investors, which fragments liquidity and prevents cross-platform trading. Lack of standardized valuation models compounds the issue, as uncertainty over net asset value widens spreads and deters active trading. The analysis asks whether hybrid exchange models could balance compliance with accessibility, and whether liquidity provision incentives could offset limited natural turnover.
The author evaluates potential remedies such as integrating RWAs into lending and collateral frameworks, citing MakerDAO’s use of tokenized treasuries to back DAI issuance as a functional form of indirect liquidity. This prompts the broader question: can liquidity be achieved through credit channels rather than continuous trading? The discussion argues that collateral-based liquidity, if scaled safely, may substitute for thin secondary markets while preserving long-term holding incentives.
In conclusion, the paper reframes tokenization’s challenge as institutional rather than technical. While nearly any asset can be tokenized, selling it remains constrained by fragmented infrastructure, regulatory silos, and insufficient market incentives. The author proposes that liquidity should be treated as a design objective, not an emergent byproduct. Achieving this will require coordinated advances in compliance tooling, valuation transparency, and market-making structures to convert tokenized RWAs from static records of ownership into genuinely tradable financial instruments.
