Pantera Capital: Q1 2026 Tokenization Status Report

Author: Franklin Bi · Ally Zach · Danning Sui

Translation: Jiahui, ChainCatcher

This report is authored by the Pantera Capital research team, with data sources including RWA.xyz, DeFiLlama, and public protocol documentation. The complete interactive data dashboard can be viewed here.

Every major bank has its own tokenization strategy. But how many of these are truly foundational infrastructure? How many are just “newspapers pasted online”? (In the early days of the internet, newspapers simply posted their print articles unchanged on web pages. Faster, broader coverage, but the product itself remained unchanged.)

We built a “Tokenization Status” data dashboard and a Tokenization Progress Index (TPI) to explore this.¹

I · Executive Summary

Tokenization Today: The “Newspaper Pasted Online” Stage

$320.6 billion in tracked market cap, a significant increase from approximately $200.6 billion in 2024.

2.04 average composite TPI score (out of 5), covering 542 rated online assets.

77.6% still in the “Wrapper” layer, 11.1% in the Hybrid layer, and 2.7% in the Native layer.

Tokenization is one of the most central narratives in institutional crypto by 2026. Every major bank, custodian, and asset manager now has a tokenization strategy.

But market activity alone doesn’t tell us whether tokenized assets are unlocking the full potential of blockchain or merely wrapping traditional infrastructure with a digital shell.

This report examines 593 tokenized assets across 11 asset classes, with a total market cap of about $321.1 billion.

We use Pantera Capital’s Tokenization Progress Index (TPI) to rate 542 active assets. This framework assesses on-chain maturity across three dimensions: issuance and redemption, transferability and settlement, complexity and composability. Each dimension is scored from 1 to 5, and the average yields the overall TPI score.²

The entire market’s average TPI is 2.04 out of 5. Based on our layering framework, about 77.6% of tracked assets are in the “Wrapper” layer, 11.1% in the “Hybrid” layer, and only 2.7% in the “Native” layer.

This framework isn’t meant to dismiss current wrapper products. Often, they reflect what clients, issuers, and regulators can accept: familiar structures, stricter controls, and incremental efficiency improvements in distribution, settlement, and access.

The purpose of TPI isn’t to criticize this initial stage but to identify where on-chain systems are beginning to replace off-chain processes substantively, and where tokenized assets are starting to unlock functions that traditional infrastructure cannot provide.

The early days of internet media involved newspapers copying and pasting articles onto websites. Speed increased, coverage expanded. But the format was identical—just a different distribution channel.

No one predicted what native internet media would look like: podcasts, algorithmic feeds, interactive visualizations, creator platforms—forms impossible in the print era.

Tokenization is currently in its “newspaper pasted online” phase. The $321 billion market has demonstrated assets can be distributed on-chain. But it has yet to produce the native financial tools that will define the future of tokenization: programmable compliance, autonomous collateral management, real-time yield optimization, embedded governance, and the ability to decompose assets into risk and income streams.

These products cannot be simply wrapped from off-chain originals; they must be created natively on-chain.

What drives the internet out of the “newspaper pasted online” phase isn’t ideology but product pressure: faster feedback loops, new user behaviors, monetization models, and content forms that only exist in new media.

The evolution path of tokenization may be similar. The next phase won’t be just “put more assets on-chain,” but creating financial products that are “better because they’re on-chain”: supporting continuous settlement, real-time collateral optimization, programmable income distribution, embedded compliance, and breaking ownership, cash flows, and risks into new financial building blocks.

² TPI scores are solely for assessing the technological and structural maturity of tokenization; they do not represent investment opinions, valuation, or performance prospects of any underlying assets or investments.

II · Tokenization Status Dashboard

To track how tokenization is moving beyond the “newspaper phase,” we launched the “Tokenization Status” dashboard—a quarterly-updated industry visualization.

This dashboard integrates structured market data from sources like RWA.xyz and DeFiLlama, combined with Pantera’s tokenization methodology and asset-level ratings, providing an interpretive layer that shows how tokenization is evolving across issuers, platforms, asset classes, and jurisdictions.

Market Map: Organizes tokenized assets by value and TVL, covering industries, platforms, and chains, showing where the market has gained traction and where value is concentrated.

Ecosystem Overview: An interactive map exploring assets, platforms, and market classifications.

Tokenization Progress Index (TPI): Scores each asset across issuance & redemption, transferability & settlement, complexity & composability, indicating the stage of tokenization maturity for assets, value, and TVL.

Six Key Findings on the Gap Between Hype and Maturity

1. Issuance is Largely Restricted (91.1%)

Average scores for issuance & redemption are only 1.82, the lowest among the three TPI dimensions. Of 542 rated assets, 494 still score 1 or 2, indicating that controlled minting and custodial exit remain the norm.

Low issuance thresholds with restricted redemptions define the current market.

2. Transferability Improves Faster Than Issuance (37.8%)

Transferability & settlement is the strongest dimension, averaging 2.29; 205 assets have reached a score of 3, indicating an expanding middle ground where assets can circulate on-chain even if the chain isn’t yet the sole authoritative ledger.

Only 35 assets (6.5%) reach scores of 4 or 5, meaning on-chain sovereignty and settlement are still rare.

3. DeFi Composability is Highly Concentrated (12.0%)

Out of 542 assets, only 65 reach a complexity & composability score ≥3, indicating substantial DeFi integration.

Stablecoins dominate in absolute value (about $26.4 billion locked in DeFi); in terms of category penetration, private credit (21.4%) and active management strategies (19.6%) have the highest on-chain active value among non-stablecoin categories.

4. Stablecoins Have Achieved Real Scale (2.67)

Stablecoins’ average TPI is about 2.67, significantly above market average, and remains the only category with both large economic scale and substantive on-chain utility.

Other categories are still early-stage, even if some are growing rapidly.

5. Market Is Widening but Not Deepening (168)

In 2025, 168 new assets launched, compared to only 78 in 2024. Total tracked value increased from about $200.6 billion in 2024 to $313.7 billion in 2025, and $320.6 billion in the latest 2026 snapshot.

While coverage is expanding, the pace of new issuance outstrips the development of full on-chain infrastructure.

6. Scale and Progress Are Beginning to Synchronize

At the asset class level, market value and average TPI show a visible positive correlation: larger categories tend to be more mature.

But this relationship is still shallow. Capital is starting to tilt toward stronger on-chain structures, but most of the market remains in mid-to-low progress zones, not fully native designs.

III · Background and Motivation

Banks Have Tokenization Strategies, But Few Build Infrastructure

BlackRock’s BUIDL fund surpassed $2 billion AUM in April 2025. Franklin Templeton’s FOBXX has been on-chain since 2021. JPMorgan’s Kinexys processes billions daily. Headlines depict a rapidly changing industry.

But these headlines measure surface metrics. A tokenized asset operating on a permissioned chain, requiring manual OTC redemptions, non-transferable without issuer approval, and lacking DeFi integration, is functionally identical to a traditional security with a blockchain receipt.

Tokens add a data layer but do not fundamentally change how assets operate.

This report introduces a framework to distinguish early tokenization from more functionally native on-chain market infrastructure.

We built a database of 593 tokenized assets, integrating best public information from sources like DeFiLlama and RWA.xyz³, and applied a unified scoring framework to all assets with visible market value.

We score each asset across three dimensions of on-chain maturity to answer a practical question: How far has the tokenization market come? Where is it still in the “newspaper pasted online” early stage?

In this sense, the report asks not whether tokenization is real but which products are still mere digital copies of traditional finance, and which are beginning to develop functions only supported by on-chain markets.

Targeted at digital asset leaders in banks and wealth management, the report aims to help them benchmark their products against the market and identify where true competitive moats are forming.

It’s also a resource for crypto-native builders to assess where the biggest gaps between current state and potential lie across asset classes and lifecycle stages.

IV · Methodology

Asset Lifecycle

We model the lifecycle of tokenized assets as a linear process. It begins with “Originate & Structure”—off-chain legal setup (entity formation, SPV/trust, registration).

This stage is not scored currently, not because it’s unimportant, but because it varies greatly across jurisdictions and remains unstable, making consistent scoring across the market impossible.

In the long run, this will change. As regulation clarifies and market structures standardize, legal design will become a more meaningful differentiator among tokenized products.

Over time, the native reflection of ownership, transfer restrictions, bankruptcy treatment, and redemption rights in legal frameworks will become as important as the on-chain mechanisms themselves. Currently, we view legal structure as an important background, while TPI focuses on operational dimensions that can be more clearly compared across assets.

The Three Dimensions of the Tokenization Progress Index (TPI)

Starting from these three key stages, we evaluate the following aspects of autonomy and on-chain native-ness:

• Issuance & Redemption: Can assets be minted and redeemed via more autonomous and symmetric on-chain mechanisms?
• Transferability & Settlement: Is the chain the authoritative management and settlement layer, or just a mirror of off-chain ledgers?
• Complexity & Composability: Can assets be used on-chain via smart contract infrastructure, enabling composability with yields?

Figure 1. Tokenized Asset Lifecycle and TPI Dimensions

The three scored stages from left to right are: Mint & Burn (creation and destruction), Trade & Transfer (liquidity and authority over ledger), Deploy & Earn (autonomous infrastructure and DeFi integration).

TPI scores each asset independently on three orthogonal dimensions, each from 1 to 5. An asset can score high on transferability but low on composability, and vice versa. The overall score is the average of the three.

Each dimension builds upon the previous—one cannot deposit into Aave if it cannot be transferred to the Aave contract.

Scoring Standards: Defining Each Level

The goal isn’t to score complexity itself but to identify where on-chain systems are truly beginning to replace off-chain processes.

The scoring standards aim to capture different forms of progress: whether issuance and redemption are becoming more symmetric, whether the chain is becoming an authoritative layer for transfer and settlement, and whether assets can be deployed into programmable on-chain infrastructure.

Issuance & Redemption

Table 1. Issuance & Redemption Scoring Standards

Table 2. Transferability & Settlement Scoring Standards

Table 3. Complexity & Composability Scoring Standards

Three Tiers: Wrapper, Hybrid, and Native

To make TPI more interpretable at the market level, assets are categorized into three tiers based on their average composite score across the three dimensions.

This classification aims to translate individual scores into a more intuitive view, showing where tokenized assets sit on the path from simple digital wrappers to truly native on-chain financial products.

The tiers are based on the average TPI score:

Table 4. The Three Tiers of Tokenization

These thresholds do not imply that maturity advances in perfectly even steps. They provide a practical way to summarize how much of an asset’s lifecycle has truly moved on-chain.

• Wrapper Tier: Tokens mainly serve as digital receipts for underlying assets, which are still managed, redeemed, and held off-chain. The chain may improve distribution or visibility but isn’t the authoritative operational layer.
• Hybrid Tier: Some lifecycle parts are on-chain—issuance, transfer, settlement, or limited composability—but key functions still depend on off-chain intermediaries, legal processes, or manual controls.
• Native Tier: Assets are designed to operate primarily on-chain. Issuance, transfer, settlement, and at least some ongoing management are governed by smart contracts, with minimal reliance on off-chain infrastructure.

This layering should be viewed as an interpretive overlay on TPI, not a substitute for the underlying scores. Two assets can be in the same tier for different reasons: one might be strong in transferability but weak in redemption, another highly composable but operationally constrained elsewhere.

The tier labels help summarize where the market is; the dimension scores explain why.

⁴ Assets mentioned in this report are illustrative only and should not be taken as investment advice or recommendations to buy or sell securities or tokens.

V · Data Analysis

593 Assets, 11 Categories, $320.6B Tracked

The analysis covers 542 rated assets out of 593 total (51 new assets are in pilot or announcement stages, not yet rated).

Asset-level data is sourced from RWA.xyz, DeFiLlama, protocol documentation, and public news/research. TVL and AUM data are from RWA.xyz and DeFiLlama, as of Q1 2026.

On-chain deployment data is based on contract verification on Etherscan, Solscan, Polygonscan, and Basescan. By integrating these sources, we unify a set of market value indicators—including bridged token market caps, AUM, and active/on-chain market caps—into a single market value layer.

This market layer is then linked with broader metadata processed via LLM assistance, including issuer, sponsor, platform, jurisdiction, and news.

We also snapshot DeFiLlama’s “DeFi Active TVL” as a measure of productive on-chain TVL, used in discussions of DeFi composability, inspired by Nexus Data Labs.

Standardizing asset categories is one of the most challenging parts of building this dataset. By harmonizing classifications from multiple sources, we group the market into 11 categories:

Market Still in Wrapper Stage, Moving Toward Hybrid

Approximately 77.6% of tracked assets are in the wrapper layer, only 11.1% reach the hybrid layer, and just 2.7% are in the native layer. In other words, tokenization has scaled at the representation level but not yet at full on-chain functionality. The focus remains off-chain, even as more assets make substantive steps forward.

Stablecoins are a clear exception and the most mature category, with 14% of assets reaching the native layer score. They have the deepest hybrid group and the largest native share, followed by active management strategies and private credit.

U.S. Treasuries, commodities, and private equity show early signs of moving toward more hybrid structures but remain predominantly in the wrapper layer.

RWA infrastructure is viewed as a special category.

It’s not a strict asset class with comparable market caps but is scored using TPI based on available info. It also includes most upcoming pilots and announcements, indicating ongoing infrastructure and legal framework development around RWA ecosystems.

Below, we summarize the 51 unscored assets in the dataset, mainly pilot projects and announced RWA issuances, mostly in the infrastructure category, with broad geographic distribution.

2025 Saw Record Issuance and Market Size Growth

168 new tokenized assets launched in 2025, a 115% increase over 2024’s 78. The acceleration from 2023-2025 reflects institutional FOMO, with every major player rushing to launch tokenized products.

But the overall TPI has not risen proportionally. The market is widening but not deepening. Most new entrants replicate the primary wrapper model rather than pushing the boundaries of tokenization capabilities.

Data clearly shows issuance is concentrated in a few categories, not evenly spread. In the recent full years of 2024 and 2025, private credit led with 48 issuances, followed by stablecoins with 46, then real estate with 36, and U.S. Treasuries with 32.

In value terms, even as issuance diversifies, the market continues to expand rapidly: total tracked value grew from about $200.6 billion in 2024 to $313.7 billion in 2025, and approximately $320.6 billion in the latest 2026 snapshot.

This indicates that since 2024, the market has added roughly $120.5 billion—about 60% growth—supporting the view that tokenization is expanding both in asset count and total value.

Stablecoins hold $293 billion, accounting for 91.6% of total market cap

Stablecoins dominate tokenized asset value, accounting for over $293 billion (about 92%) of the total tracked market cap of $320.6 billion. Driven by institutional demand for on-chain yields, U.S. Treasuries have grown to about $12 billion.

Commodities also surged to roughly $7.1 billion, but this rise partly reflects the 2025 gold price increase: existing tokenized gold products appreciated as the underlying assets gained value, not just from new assets coming on-chain.

Long-tail categories—private equity, real estate, corporate bonds—remain small by AUM. Market value is concentrated in categories that reached on-chain maturity earliest, not those with the most corporate announcements.

Institutions have driven U.S. Treasuries to $12 billion, making it the second-largest on-chain asset

Tokenized U.S. Treasuries (noted and abbreviated as “Treasuries” in this report) represent the most notable success in institutional tokenization—growing from near zero in 2021 to about $12 billion in 2026.

The growth is exponential, likely reinforced by recent persistent compression of DeFi yields, sometimes below U.S. Treasury yields, making tokenized Treasuries more attractive as on-chain parking.

Despite rapid growth, TPI analysis shows most Treasuries are still in early stages—mainly first-tier wrappers with custodial redemption and off-chain ledger architectures.

This growth is increasingly driven by large, well-known institutions rather than long-tail experiments. The largest tokenized Treasury products in our dataset include:

• BlackRock (BUIDL, ~$2.1 billion, issued via Securitize)
• Franklin Templeton (FOBXX/BENJI, ~$1 billion, via Franklin Templeton Benji Investments)
• Juno Henderson/Anemoy (~$1 billion, via Centrifuge)
• WisdomTree (WTGXX, ~$752 million, via its own digital fund platform)
• Fidelity (FDIT, ~$8B, via Fidelity Investments)

This indicates tokenized Treasuries have become the clearest foothold for institutions: a major financial firm willing to put familiar short-duration dollar products on-chain, even if deeper native features are still emerging.

Institutional footprints are also extending beyond Treasuries.

In private credit, Apollo’s Apollo Diversified Credit Securitize Fund (~$131 million) appears in the dataset, along with structured credit products from Centrifuge’s ecosystem.

In stablecoins, Societe Generale’s FORGE EURCV is an early example of a large bank’s native tokenized cash product.

A broader pattern is that large institutions enter tokenization not through fully native on-chain financial structures but via familiar products, often relying on partners like Securitize, Centrifuge, and Libra to bring these onto the chain.

Growth Diverges: Some Asset Classes Saturate, Others Just Starting

Growth curves at the category level show tokenization isn’t a linear adoption story but a cyclical process. RWA markets have existed in some form for years, but the 2022 downturn clearly showed they aren’t insulated from broader crypto contractions.

The current cycle’s key question is how quickly momentum recovers from the bottom: since that low point, most major asset categories have regained upward momentum, indicating tokenization is shifting from sporadic experiments to more durable market structures.

Stablecoins and active management strategies are the earliest and fastest-growing sectors in this rebound, though their growth trajectories seem to slow after a particularly strong previous year.

In contrast, private equity and commodities have seen the strongest growth over the past two years, with no clear signs of slowing.

U.S. Treasuries and tokenized equities are newer developments post-2022, but their curves now look flatter compared to initial breakthroughs, possibly indicating rapid saturation.

Real estate and non-U.S. sovereign debt appear more in early adoption phases: their growth histories are shorter, and it’s too soon to tell if these are lasting trends, but both are areas with potential where value foundations are still forming.

Corporate bonds, a single data point that only appeared at the top of the 2025 chart, are the newest and most hyped category based on growth rate.

This sequence is barely visible in the data but shows promising directionality: starting from a very small base, it could be one of the most promising emerging sectors with high upside potential.

Market Size and TPI Scores Are Beginning to Move in Tandem

The scatterplot below maps each asset class by its average TPI score (x-axis) against its total locked value (y-axis, on a log scale). The latest market structure indicates that market size and tokenization progress are no longer independent.

At the asset class level, a clear positive relationship emerges: larger categories tend to be more mature in TPI. Stablecoins lead in both dimensions, and Treasuries also combine large scale with more advanced tokenization progress than most non-stablecoin categories.

On the other end, real estate and private equity are lower in both value and tokenization maturity, reinforcing their reliance on off-chain legal, custodial, and service processes. But this relationship remains directional, not linear.

Categories like commodities and private credit have accumulated meaningful value but haven’t yet jumped into high TPI territory. In other words, capital is starting to favor more structurally robust designs, but scale is outpacing full on-chain maturity.

91% of tokenized assets still face issuance & redemption approval restrictions

Score distributions across dimensions still show market concentration at the low end, with issuance & redemption remaining the most obvious bottleneck.

In the latest data, 494 of 542 rated assets (91.1%) score 1 or 2 in issuance, meaning controlled minting and custodial exit remain standard. Only 13 assets (2.4%) score 4 or 5, indicating truly autonomous or symmetric mint/burn models are still rare.

Transferability & settlement show more dispersion: 205 assets (37.8%) reach a score of 3, indicating a middle ground where tokens circulate on-chain but the chain isn’t yet the sole authoritative ledger.

Complexity & composability are even more compressed. 394 assets (72.7%) score 2, and only 21 (3.9%) reach 4 or 5, confirming most tokenized products are still simple wrappers rather than deeply programmable on-chain financial primitives.

Private credit leads with 64.3% DeFi utilization

Breaking down TPI scores by asset class, stablecoins lead across all three dimensions, especially in transferability & settlement, scoring 3.2, reflecting multi-chain deployment and increasingly on-chain ledger architectures.

Tokenized equities and treasuries follow, with relatively balanced scores. At the bottom, real estate and private equity have composite scores below 1.5, reflecting platform closedness and reliance on off-chain structures.

Only 10.6% of all asset classes reach a complexity & composability score of 3 or higher (i.e., with substantial DeFi integration). This confirms most tokenized assets are primarily distributed as simple wrappers rather than as productive financial primitives.

Stablecoins still dominate in absolute value, with about $26.4 billion currently locked in DeFi, far surpassing all other categories.

A more revealing signal is the penetration rate within categories. The latest data points to an unexpected trend: private credit has become the most DeFi-integrated category in the dataset, with 64.3% of its total market cap showing active DeFi TVL, followed by active management strategies at 19.0%.

In contrast, stablecoins rank much lower on this metric, at only 9.0%, despite their overwhelming absolute scale.

An important subtlety is that these two signals measure different things. TPI is an asset-level average, while DeFi utilization is dollar-based. So, categories like private credit may have modest average TPI scores but very high DeFi penetration.

One reason is concentration. In private credit, DeFi use is dominated by a few protocols and products. For example, Maple’s syrupUSDT and syrupUSDC account for about two-thirds of the active DeFi TVL in that category. This means private credit’s composability is real but not yet broadly integrated across the category.

Another key reason appears to be the nature of the assets themselves. These successful private credit products are yield tools accepting stablecoins as collateral, naturally fitting DeFi yield strategies, especially where users can leverage and compound through multi-layer vaults.

In this sense, DeFi utilization isn’t just about issuer concentration; it also shows that more native on-chain architectures can enhance utility. These assets offer a different kind of yield compared to core crypto beta, making them especially useful in on-chain portfolio construction.

Active management strategies show a similar pattern. The category ranks second in DeFi composability but is highly concentrated among a few products.

Just the Superstate Crypto Carry Fund accounts for about 80% of the active DeFi TVL in that category, with the rest from a handful of other products like Re Protocol’s reUSDe, Midas’s mBASIS, and Resolv Liquidity Provider Tokens.

Larger categories like U.S. Treasuries and commodities have only 3.2% and 2.5% of their value in DeFi, respectively, while real estate and corporate bonds are effectively zero.

Stablecoins remain the most significant DeFi building block in absolute value, with most supply outside productive DeFi serving as cash-like holdings for payments, trading, treasury management, and settlement.

In other words, stablecoins’ DeFi utilization is low not because they aren’t mature as collateral, but because their utility drives them into circulation rather than locking them in vaults as investments.

Meanwhile, private credit and yield-oriented active strategies demonstrate their utility as investment tools, increasingly accepted and used as collateral on-chain.

Tokenization Is More Concentrated Than It Looks

Building on the above, the tokenization market appears even more concentrated than surface metrics suggest. Excluding stablecoins, the top five issuers account for about 50% of all rated assets.

Securitize (focused on institutional issuance) leads with $2.7 billion across multiple asset classes, followed by Maple (credit and treasuries), Tether Holdings (gold commodities), and Ondo (multi-asset).

TPI scores vary significantly across platforms: Ondo averages 2.3, Securitize 1.6, while some (Robinhood, MetaWealth) score around 1.0, indicating pure wrapper tokenization.

Geographically (including stablecoins), the British Virgin Islands dominate with $191.5 billion (including $185 billion from USDT registered there, which moved to El Salvador in 2025), followed by Bermuda ($76.1 billion, 24%) and the US ($23.6 billion, 7%).

Notably, assets registered in the US have an average TPI of 2.0, while those in the BVIs/Liechtenstein (often Reg S issues) tend to score lower.

Regulatory environments seem linked to tokenization approaches: SEC-regulated products tend toward wrapper models, while DeFi native protocols registered in crypto-friendly jurisdictions tend to score higher.

TPI by Chain: Permissioned Chains Mean Lower Native Degree

Current data shows network architecture significantly impacts tokenization progress.

Public chains with deeper composability and broader secondary market functions tend to have higher average TPI: Optimism and Base are near the top at about 2.6 and 2.5, while Ethereum and Solana cluster around 2.3.

More operationally constrained environments like XRP Ledger are closer to 2.0.

Canton Network offers an instructive case: a permissioned chain supported by Digital Asset, Goldman Sachs, and BNY Mellon, with assets averaging a TPI of about 1.75—below the market average of 2.04.

This isn’t a failure of execution but a structural result of design philosophy and market demand. Institutional permissioned chains prioritize compliance and control over on-chain autonomy.

Canton confirms that permissioned chains tend to produce lower-maturity tokenization, even with strong institutional backing.

VI · Tokenization Strategy Playbook

Wrap, Connect, Compose, Native

Most tokenization strategies are designed as cost-cutting projects: streamlining back-office, shortening settlement windows, automating reconciliation, and translating savings into P&L. This is a legitimate path to activate tokenization benefits but also a narrower one.

A broader path involves leveraging tokenization to create new distribution channels and revenue streams: reaching global capital pools and investor types that traditional infrastructure can’t serve efficiently.

The TPI framework maps onto four stages of this journey. What it doesn’t show are the embedded strategic inflection points. The first stage is a forced cost; the second to fourth are where institutions decide what kind of business they’re building.

Stage 1: Wrapper (TPI 1-2)

Some describe the first stage as the “zero-to-one moment” of institutional tokenization. More accurately, it’s a v0.1—an essential foundation but not a product.

Reaching Stage 1 still requires significant work. Issuers often can’t launch even basic wrapper products without rebuilding their compliance frameworks. Securities registration, transfer agent arrangements, custody frameworks, KYC/AML workflows, broker relationships, tax reporting, investor accreditation, and disclosure regimes may all need to be re-mapped onto tokenization tools.

Legal opinions must be rewritten. Auditors need to adapt. Compliance committees must approve novel architectures. This explains why 88% of assets in this report remain in Stage 1.

But Stage 1 is just the foundation. It establishes on-chain presence but not on-chain utility. Token wrappers as digital receipts still depend on off-chain infrastructure. The chain marginally improves distribution and visibility but doesn’t fundamentally change how assets operate.

The risk of Stage 1 isn’t failing to reach it. The risk is remaining there forever, with market focus shifting to stages that first-stage architectures can’t reach.

Stage 2: Connect (TPI 2-3)

Stage 2 is where tokenization strategies begin to differentiate and where the most critical decisions are made: are you optimizing for cost savings or building for new growth?

Cost-saving paths treat Stage 2 as an internal efficiency project—what most institutional tokenization projects look like in 2026. Dual-ledger systems replace pure off-chain architectures; whitelisted transfers enable controlled secondary markets. Success yields real backend efficiency gains reported as profit margin expansion.

It preserves existing distribution channels, maintains current client relationships, and delivers quantifiable efficiency benefits to justify investments. It’s a defensive strategy with a ceiling.

Growth paths see Stage 2 as a platform for reaching and creating entirely new markets. Oracles, smart contract governance, and gradually opening up on-chain transferability aren’t about internal efficiency—they’re about expanding distribution, bringing assets into new pools, and laying the groundwork for Stage 3 composability. Tools from this stage are designed from day one to be accepted as collateral in protocols like Morpho, integrated into DeFi yield vaults, and referenced by AMMs like Uniswap.

Stage 3: Compose (TPI 3-4)

Composability is the threshold for tokenized assets to become building blocks. They can be collateralized in Morpho or other lending protocols, managed in risk vaults governed by companies like Gauntlet or Steakhouse, integrated into structured products, and combined with other on-chain assets to generate yield curves unavailable in traditional markets.

Assets evolve from being held on-chain to being actively used on-chain.

The data in this report already shows where this is happening. Private credit’s DeFi utilization is 64.3%, led by Maple’s syrupUSDT and syrupUSDC, designed from inception to be acceptable as collateral and to cycle through multi-layer vaults.

Active management strategies reach 19.0%, led by the Superstate Crypto Carry Fund. These are products designed from the start for composability, accepting compliance re-engineering, and now reaching distribution channels that first- and second-stage assets can’t.

Only 12% of the market has reached Stage 3. This is both a measure of how hard it is to get there and how wide the moat is once crossed.

Stage 3 is also where new on-chain distribution channels emerge: capital pools. Stablecoin balances held by DeFi-native investors, DAOs, crypto-native funds, and idle capital protocols form a capital pool that largely bypasses traditional markets.

These pools are accessed via composability, not broker networks or institutional sales teams. An issuer with composability can access this pool; one stuck in Stage 1 or 2 cannot.

But greater on-chain utility through composability also creates new channels for financial contagion. Recent market stress around the KelpDAO hack highlighted concerns about collateral quality, cross-chain bridge security, and pooled collateral design—how they can trigger rapid risk-off behavior and TVL contraction.

The lesson isn’t to avoid composability but to recognize that higher composability standards raise risk management bar. As tokenized assets become more widely accepted as collateral, markets will need better collateral transparency, improved isolation frameworks, real-time monitoring, and clearer stress testing practices.

All of Franklin Templeton’s 100% digital asset AUM is from crypto-native clients. These clients didn’t exist before we launched these products and started expanding through these channels. It opens entirely new audiences, and inflows are accelerating.

This is an expansion of financial services toward more direct-to-consumer models. The industry has long been built on intermediaries, but now individuals, quasi-institutional households, and institutions themselves want to run their models and businesses through these channels. It’s a true front-end expansion.

— Sandy Kaul, EVP and Head of Innovation at Franklin Templeton

Stage 4: Native (TPI 4-5)

Stages 1-3 involve gradually migrating existing off-chain assets onto the chain. Stage 4 begins on-chain. Issuance, redemption, custody, settlement, and governance are designed as native primitives from day one: permissionless minting and burning, on-chain sovereign ledgers, autonomous risk engines, cascade settlement, and governance operating without manual intermediaries.

Today, only DeFi-native protocols fully occupy this tier: MakerDAO’s USDS, Aave’s GHO, and a few others. These examples may seem far from institutional tokenization.

For digital asset leaders today, the question isn’t whether you’ll launch the next USDS. It’s how the evolution from current wrapper products to future native products will happen, what will drive that shift, and where competitive pressure will come from.

Consider how products like BlackRock’s BUIDL might evolve. Today, BUIDL is a wrapper for a off-chain money market fund share. Shares are minted by the admin, redeemed via T+1 transfer agent, and transferred only to whitelisted addresses. This is Stage 1.

In Stage 2, transfer restrictions are relaxed among qualified investors, and redemption windows are shortened.

Stage 3 enables the token to be used as collateral in protocols like Morpho, with real-time oracle pricing and integrated risk management—still administrative issuance but with on-chain productivity. These steps are critical for product roadmaps.

Stage 4 eliminates the off-chain master ledger. Tokenized shares are just shares. Interest accrues per block, not monthly. Funds rebalance programmatically based on yield curves and liquidity signals. Compliance is embedded in each transfer, not after-the-fact review.

The same logic applies across asset classes:

• Tokenized Treasuries: today wrappers around short-duration USD products, evolving into on-chain yield instruments with native coupon accrual, principal management, and secondary liquidity. In Stage 4, maturity and coupon components can be separated and traded independently—akin to treasury strips but only feasible with programmable infrastructure.
• Tokenized Private Credit: already highly composable, can evolve into native structures where loans are underwritten and managed on-chain, with programmable tranching, autonomous collateral management, and continuous valuation—replacing quarterly NAV reports.
• Tokenized Corporate Bonds: still early in wrapper form, could evolve into instruments with ongoing coupon payments, executed via smart contracts, with default triggers that don’t require trustees. The underlying credit risk remains the same, but operational infrastructure differs fundamentally.

Stage 4 isn’t a separate universe after Stage 3; it’s the position stablecoins occupy today. It’s the logical endpoint of the Stage 2 growth path.

VII · Conclusions and Outlook

Results Over Wrappers

The industry has proven assets can be represented on-chain, but not yet that on-chain representation fundamentally changes asset operation. The gap between tokenization announcements and real maturity remains large.

The next phase of market maturity will be defined less by how much value is tokenized and more by utility metrics and real demand:

• How quickly are settlements completed, measured in milliseconds?
• How low are transfer costs relative to transferred dollar value?
• How many on-chain wallets hold the asset?
• What’s the daily transfer and trading volume?
• How much value is actively deployed in DeFi?

Institutions investing in true infrastructure—autonomous