RWA in blockchain: What Real World Assets are, how they work, and key risks

Real World Assets (RWA) are real-world assets represented on blockchain through tokens. Simply put, an RWA is a token that represents a claim over a real asset (or over its yields), backed by a legal structure.

RWAs include:

• Treasury bonds and bills
• Money market funds
• Private credit
• Real estate
• Commodities (such as gold)

In this post we’ll explain what RWAs are, how they work in practice, and which signals can help you separate marketing from real engineering in an RWA in 2026.

An RWA is an asset whose value comes from the traditional world, but whose digital representation as a token makes it possible to:

• Issue shares or economic rights
• Transfer those rights under rules (permissioned or not)
• Use the asset as collateral, reserves, or a protocol component
• Automate events (coupons, maturities, settlements) via smart contracts

In practice, the token is rarely the asset in the official registry sense. Most commonly, the token represents a legally enforceable right over a structure.

💡 Example: a company acquires a property and issues tokens. If you hold those tokens, you may have rights to a portion of the rent or profits. But if there’s fraud or legal issues, the blockchain doesn’t “fix” anything: the token only records “who owns what.” What happens next is resolved off-chain, via contracts, regulation, and, if needed, courts.

RWAs are gaining traction for three main reasons:

• Real yield: RWAs connect DeFi with returns from traditional markets (for example, public debt).
• Risk diversification: in volatile cycles, they can diversify reserves and collateral with dynamics different from a purely crypto token, reducing exposure to the same source of risk.
• Institutional interest: the number of initiatives exploring tokenization with structures closer to financial standards is growing. Examples include BlackRock, which launched its tokenized BUIDL fund on Ethereum, or Franklin Templeton, which runs the on-chain money market fund FOBXX, marking a shift in scale.

In short: RWA isn’t “tokenize just to tokenize.” It’s about making traditional assets programmable and composable (i.e., usable by other protocols) in an on-chain environment.

There are many categories, but the market is converging toward a few that fit well with infrastructure and legal compliance:

Most common RWAs:

• Public debt and cash equivalents: treasury bills, bonds, and tokenized money market funds. They fit well due to liquidity and a relatively well-known framework.
• Private credit: loans to companies, factoring, and receivables. The key is serious underwriting and risk management.
• Commodities: especially tokenized gold. The critical point is secure custody and verifiable audits.

More complex RWAs:

• Real estate: tends to work best as economic rights via a special purpose vehicle (SPV). Operations (tenants, maintenance, litigation) don’t disappear just because you tokenize.
• Operating assets and future cash flows (for example, a percentage of sales or royalties) can be done, but require a much more robust legal, accounting, and data design.

To understand RWAs operationally, think of a pipeline with two halves: off-chain (legal, custody, data) and on-chain (contracts, rules, DeFi integration).

1) Asset and legal structure

This defines the “what” and the “how”:

• Who originates or manages the asset (asset manager, bank, credit originator)
• Which rights are tokenized (ownership, debt, participation, cash-flow rights)
• Which structure is used (fund, trust, SPV, notes, etc.)
• Which jurisdiction and documents support enforceability

2) Custody and backing controls

The underlying asset must be held in custody and audited in a verifiable way. This is where much of the risk lives:

• Where the underlying is held
• What audits exist and how often
• What happens if the custodian or issuer fails

3) On-chain issuance and transfer rules

On-chain contracts are deployed to represent those rights and typically include:

• Restrictions, if applicable (by country, investor type, allowlists)
• Roles (issuer, transfer agent, compliance)
• Subscription and redemption logic (how capital enters/exits)
• Yield distribution logic (when applicable)

4) Data, oracles, and continuous verification

The real world must “enter” on-chain:

• Price / NAV (net asset value);
• coupons, maturities, default events;
• reserves and reconciliations.

Some models use proof-of-reserve mechanisms and contingency controls (pauses, limits) if data doesn’t match.

5) DeFi integration

When the token can be used in other protocols, the greatest value appears… and also the greatest risk:

• Collateral
• Automated strategies
• Stablecoin issuance
• On-chain treasury management
• Credit markets

And that’s also when the cost of a bug increases: if the RWA becomes composable, there’s no room for “deploy and pray.”

Something being “institutional” doesn’t automatically make it safe. In RWAs, risks are spread out:

• Counterparty risk: issuer, custodian, originator, auditor. If they fail, the token still exists, but the economic right can deteriorate.
• Regulatory risk: depends on jurisdiction and structure. “Tokenizing” doesn’t remove obligations. In the European Union, for example, the Markets in Crypto-Assets Regulation (MiCA) establishes the framework for issuance and for providing services related to crypto-assets.
• Liquidity risk: the token can transfer quickly, but the underlying may be illiquid or lack a deep market.
• Technological risk: smart contracts, oracles, permissions, integrations, cybersecurity, and operational risk.
• Transparency risk: what exactly are you buying. If it isn’t clear, that’s a bad sign. The report Tokenization of Financial Assets (IOSCO) explicitly highlights investor confusion about whether they own the underlying asset or a digital representation with issuer risk, as well as new technological risks.

1) Treasuries for protocols and crypto companies: MakerDAO has used U.S. Treasuries as a relevant part of DAI’s reserve management, turning “idle cash” into more conservative yield.

2) Stablecoins and more sophisticated reserves: Circle’s USDC keeps most of its reserve in the Circle Reserve Fund, a 2a-7 government money market fund.

3) On-chain credit with off-chain underwriting: Goldfinch is a credit model where loans rely on legal structures and off-chain collateral, with capital and tracking on-chain.

Conclusion: why RWAs matter

RWAs can be one of the most serious paths to connect traditional capital with crypto rails: more efficient settlement, programmable assets, and new possibilities in financial design.

But the key point is this: in RWAs, infrastructure is part of the risk. It’s not enough to “have a token”: you need legal guarantees, custody, reliable data, and flawless technical operations.

At Stakely, we closely follow this evolution and support RWA-focused networks as validators; for example, providing 24/7 availability and hardened security for networks like Pharos, which positions itself as an L1 designed for RWA use cases.