Rethinking RWAs

It’s been a little while since I’ve posted, but I’m looking to change that. The past month in crypto has been a roller coaster—prices whipsawing, CT sentiment at all-time lows, everyone fighting over airdrop scraps. And yet, on the other side, institutional and government adoption is accelerating, regulatory clarity is improving, and the broader framework for mainstream integration is coming into focus. It’s a weird split-screen moment where retail capitulates and complains while the big players quietly set the stage for the next cycle. As a venture investor I’ve increasingly tried looking at opportunities through the lens of “what happens if everything goes right”, vs “what could go wrong here”, and my thoughts here are very reflective of that.

I remain very optimistic. A lot of what I laid out in my earlier piece its... all over...[??] is starting to take shape. We’re still in the mud, but patience is key as the pieces fall into place. Lately, I’ve been diving deeper into a few verticals including RWAs, and while progress is being made, there’s still a long way to go. Crypto’s greatest strength isn’t just tokenizing things—it’s building better market structures and unlocking liquidity where none or limited existed before. That’s a big opportunity that can be implemented in the near term and have large impacts on existing assets, and I think we’re just scratching the surface.

Hope you enjoy this one.

Over the past year, I’ve become increasingly interested in the intersection of permissionless blockchain rails and Wall Street—a space now broadly categorized as Real World Assets (RWAs). I dislike the term RWA (along with DePin, another acronym that sucks), but there’s no denying that this has been one of the most hyped areas in crypto liquid and venture over the past 12 months. TradFi’s foray into the sector, first with BTC and ETH ETFs and BlackRock’s BUIDL fund, underscores Larry Fink’s broader ambition to tokenize, well, everything. This has electrified the market, fueling a wave of entrepreneurial enthusiasm and venture investments. I love the idea of a world where all financial instruments and hard assets are tokenized and trade seamlessly on blockchain rails, enabling global 24/7 liquidity. But I also think we’re a long way from that reality, and realistically we’re in an experimental phase. For example, its estimated that there is $2,000,000,000,000 of private credit out in the world, and rwa.xyz shows almost $11,900,000,000 on-chain - this is just short of 0.6% of the total market. Its small right now, but if you squint hard enough you can see a future where these markets grow to a much larger percentage. One problem at this point is that often what I see are projects that are building solutions in search of problems or a TradFi copy/pasta from web2/web3 lacking innovation. The early internet followed a similar trajectory—initially mirroring legacy systems before evolving into something entirely native to the medium. I believe financial assets will follow the same path, gradually shifting from traditional frameworks to more seamless, blockchain-native structures.

A roadblock at this moment is that legacy financial infrastructure is deeply entrenched, and for most consumers, it works just fine. If I want to buy a stock, ETF, or even crypto, I can log onto my Robinhood account, transfer funds from my bank, and hit "buy" in a matter of seconds. Whether or not my assets are tokenized is irrelevant to me—I care about execution, price, and convenience. That said, in the near term, the most compelling use cases for RWAs lie in markets that are illiquid, inefficient, or burdened by excessive intermediaries. Unlike established equity markets, which already have seamless infrastructure, these sectors often require private brokers —or multiple layers of intermediaries—to facilitate transactions. Additionally, the emerging RWA sector could open new pathways for international investors. Greenback-denominated stablecoins have demonstrated strong global product-market fit, increasingly replacing paper currency as a preferred store of value in countries facing high inflation or political instability. These same individuals could have frictionless opportunities to invest in U.S. assets, further integrating stablecoins (and the US dollar) into the global financial ecosystem. A few of the most promising areas for adoption, in my view, are luxury goods, fractional ownership of large, rarely traded assets, and private equity trading.

Luxury Goods

Luxury goods have long suffered from opaque, fragmented secondary markets. Buyers today have limited options—pawn shops, secondhand marketplaces, or a patchwork of online platforms. Some categories, like high-end watches, have benefited from platforms such as Chrono24, which provides a listing-based marketplace with price transparency, though it lacks the liquidity and efficiency of trad fi markets. Other asset classes—high end handbags, fine wines, fine art—remain largely illiquid, with no standardized infrastructure for trading or financialization. A handful of web2 startups are attempting to solve this, but liquidity remains thin compared to the overall market due to interest and limited capital efficiency.

One of the biggest challenges is that many buyers treat these goods as stores of value rather than display pieces, yet they have few ways to unlock liquidity from their holdings. Several protocols launched in the past couple of years are addressing this gap with crypto protocols, particularly in luxury watches, which are easier to grade and store securely at a relatively low cost. These platforms allow users to send in their watches for authentication and secure storage, issuing tokenized representations that can be freely traded or used as collateral on public, permissionless blockchains. If an owner wishes to retrieve their physical watch, they redeem the token through the protocol, at which point the asset is delivered and the token burned.

The real breakthrough here is capital efficiency. Investors can collateralize tokenized luxury assets to borrow against them in permissionless lending markets, freeing up capital for other investments. The underlying bet is that their return on capital exceeds their borrowing cost, netting them arbitrage profits (or risk on…). Meanwhile, lender earns market yield knowing the loan is backed with a collateralized tokenized asset. If a borrower defaults, the lender takes ownership of the tokenized asset and can resell, re-lend, or redeem it. This model doesn’t just create liquidity where none existed—it also facilitates price discovery and enables more sophisticated financial strategies for asset owners.

This model has been experimented with over the past year or two, but hasn’t quite found product market fit and some protocols have even shut down. Its of my opinion that we’re still in the early days of this model and it has the potential to reshape how high-end assets are bought, sold, and leveraged—turning once-illiquid luxury goods into financial instruments and paving the way for broader adoption across other luxury markets. Time will tell.

Fractional ownership of large, rarely traded assets

Another compelling case for tokenization is minority ownership of large, rarely traded assets—think professional sports teams, trophy real estate, and high-end commercial buildings. Today, owning a slice of a sports franchise requires either extreme wealth/access or participation in a limited number of publicly traded entities, such as Manchester United or the Green Bay Packers’ unique share structure. But imagine a world where a minority stake in the Pittsburgh Steelers could trade freely on blockchain rails. Fans and investors could complete KYC, connect their wallets, and instantly gain exposure to the team’s financial performance—or more likely its on-field success.

The same logic applies to luxury real estate and high-end commercial building, where ownership is traditionally concentrated among a select few. Tokenized fractional ownership could democratize access to these asset classes while ensuring clear governance structures that prevent the chaos of widely distributed ownership. Instead of an elite club of high-net-worth individuals controlling these assets, retail investors could gain exposure to cash flows, appreciation, and even governance rights seamlessly and in real time vs the existing web2 solutions that can’t offer this. Most importantly its highly liquid.

Beyond accessibility, tokenization could enhance price discovery for these assets. Unlike traditional private markets where valuations are often opaque and subjective, an open market for these assets would enable continuous price discovery through transparent buy and sell orders. This could lead to more accurate, market-driven valuations and reduce the illiquidity discount that often plagues these assets. Increased liquidity would also create a more dynamic investment environment, where capital can flow more efficiently between asset holders and new buyers.

Furthermore, institutional players looking to rebalance their holdings could benefit from a more liquid exit strategy. Rather than seeking a direct buyer for a multimillion-dollar real estate asset or a sports franchise stake—often a process that takes months or even years—tokenization could provide an instant market for partial ownership sales, making the transfer of value more seamless and cost-effective. This transformation could fundamentally reshape how investors think about illiquid, high-value assets, making them more accessible, tradable, and ultimately more valuable in the long run.

Locked or Illiquid Investments

Today, secondary marketplaces, brokers, and tender offers provide early employees and investors with a path to liquidity before an IPO. But the process is cumbersome, expensive, and opaque. Sellers must work through intermediaries who source buyers and negotiate terms—charging hefty fees of 1-5% of the transaction. For a $10 million deal, that’s $100,000 to $500,000 in fees, just for matchmaking and paperwork. The process is slow, subject to company-imposed restrictions, and often lacks transparency. Many private firms exercise right-of-first-refusal (ROFR) clauses, giving them the ability to block or delay sales. Meanwhile, as companies stay private longer—sometimes for 10-15 years—demand for early liquidity has surged. I see the weekly secondary deals from brokers on a weekly and monthly basis and the process can be very cumbersome to buy or sell.

Tokenizing private shares could streamline these transactions, reducing inefficiencies and opening markets to a broader range of participants. A permissionless on-chain system could introduce real-time bid/ask price discovery, automated settlement, and built-in compliance rules, making the market more efficient and accessible. Instead of relying on opaque broker negotiations, permissionless on-chain trading could replace private dealmaking with an open marketplace, reducing asymmetry between buyers and sellers. Liquidity would also improve, as shares could trade continuously rather than being confined to structured liquidity events that occur sporadically. By cutting out intermediaries, transaction costs could drop significantly, making pre-IPO investing more accessible and efficient. More frequent trading of private shares could provide a clearer valuation benchmark before a company goes public, reducing the volatility often associated with newly listed stocks.

Beyond efficiency, tokenized pre-IPO markets could help companies facilitate structured liquidity programs for employees, ensuring controlled share distribution while generating revenue from transaction fees. If implemented correctly, tokenized equity could reshape private markets much in the same way that ETFs transformed public investing. As institutional interest in permissionless on-chain financial infrastructure grows, large volume and liquidity for tokenized private equity markets may not be as far-fetched as they once seemed. The shift won’t happen overnight, but for a growing number of investors and employees stuck in illiquid private shares, the current system already feels outdated. It only takes one really good use case for everyone to pile into this strategy (cough cough, SpaceX…).

Wrapping up

Despite these promising use cases, the road to full-scale adoption is long. Regulatory uncertainty, compliance burdens, and institutional inertia pose significant barriers. Although we’re in a crypto friendly policy era, its unclear how regulations will shift in favor of different asset classes moving on-chain. Still, momentum is building. The RWA sector, tracked by platforms like rwa.xyz, is expanding rapidly and theres growing interest to enter crypto from financial institutions and investors alike. As infrastructure matures and more protocols are developed, these models could shift from speculative experiments to mainstream financial tools. I’m particularly excited to see more exotic asset classes leading the way on-chain—beyond stocks and bonds, into assets that need a market facelift to get them into the modern financial world.