Final up to date on June 1st, 2026 at 12:20 pm
Tokenization is commonly introduced as a breakthrough that might unlock liquidity throughout a variety of historically illiquid belongings. The idea of tokenization is easy: convert belongings like actual property, non-public credit score, or collectibles into digital tokens, making them simpler to entry and commerce on-chain.
This innovation has pushed robust industry-wide curiosity over time, with extra asset courses being introduced on-chain as a part of a broader push towards digital finance.
Nevertheless, key {industry} stakeholders like Oya Celiktemur, EMEA Gross sales Director at Ondo Finance, have spotlighted some gaps. Throughout Paris Blockchain Week 2026, Celiktemur famous that there’s nonetheless a widespread misunderstanding that tokenization alone could make illiquid belongings straightforward to commerce.
So, are expectations round asset tokenization’s influence on market liquidity being overstated?
The place Tokenization Truly Works Nicely
Tokenization creates probably the most significant influence in markets that have already got lively participation and constant demand, however are held again by gradual infrastructure, excessive transaction prices, or restricted entry pathways. In these environments, liquidity is just not the principle difficulty; execution and settlement effectivity are.
Moderately than creating new patrons or sellers, asset tokenization improves how present markets function. It upgrades the underlying infrastructure that connects contributors, making buying and selling processes extra direct and fewer depending on a number of layers of intermediaries.
The place it provides probably the most worth
That is most seen in conventional monetary markets comparable to authorities bonds, publicly traded equities, ETFs, and enormous institutional asset swimming pools. These are markets the place capital is already lively and constantly shifting, however the place settlement techniques, reconciliation processes, and cross-border constraints nonetheless depend on legacy frameworks.
In these circumstances, tokenization helps shorten settlement timelines, scale back operational friction, and enhance entry to fractional possession the place it’s sensible. It will possibly additionally simplify how belongings are recorded and transferred throughout techniques, decreasing administrative overhead for establishments managing giant volumes.
The important thing consequence is improved market effectivity. Belongings transfer by the system sooner, prices are lowered, and participation turns into simpler, however the underlying liquidity is just not newly created. It’s merely made extra usable and extra effectively distributed.
The place Tokenization Falls Quick
In line with Oya Celiktemur, EMEA Gross sales Director for Ondo Finance:
“I feel there’s nonetheless this concept that tokenizing one thing illiquid will by some means magically make it a liquid asset, which is simply not true”. She added that belongings like actual property and personal credit score “had been by no means that liquid” to start with.”
Francesco Ranieri Fabracci, head of tokenization growth at Tether, echoed the same view.
“It’s not that in the event you put an asset onchain, it is going to be liquid,” he mentioned, arguing that solely a narrower set of devices, together with bonds, cash market funds and stablecoins, are prone to obtain constant liquidity in tokenized markets.”
In these circumstances, placing an asset on-chain could make it simpler to symbolize or switch, nevertheless it doesn’t remedy the deeper difficulty: there merely aren’t sufficient lively contributors keen to commerce it at scale.
Belongings with inherently weak or inconsistent demand:
This contains ultra-niche non-public funding alternatives which are engaging solely to a really restricted circle of potential traders, in addition to very particular bodily belongings in the true world, comparable to uncommon collectibles, custom-made merchandise, or privately negotiated investments. These belongings already discover it troublesome to draw patrons, even in conventional markets.
After they’ve been tokenized, these belongings often don’t bear a lot buying and selling within the secondary market. Whereas it could be technically doable to commerce these belongings, they not often see any buying and selling volumes, since there isn’t any stable or ongoing demand for them.
Generally, asset tokenization creates a misunderstanding of liquidity, which means {that a} sure asset turns into extra simply traded attributable to its digital presence alone, quite than attributable to its precise buying and selling.
Whereas tokenization would possibly assist higher symbolize and switch belongings, it can’t create the demand essential for the creation of a useful and liquid market.
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Structural Limits That Tokenization Can not Resolve
Even with improved expertise and on-chain entry, tokenization nonetheless runs into deep structural issues which are rooted in market economics.
Value discovery difficulties
The dearth of lively and steady buying and selling makes valuation extraordinarily subjective. With out ample buying and selling, there may be little worth discovery, which implies that the valuation will possible be guesswork. Tokenization would theoretically enhance buying and selling effectivity, however it could additionally improve mispricing dangers, significantly when the markets are thinly traded, the place even a small commerce might influence the value.
Regulatory conflicts
Whereas tokenization offers liquidity to an asset, it doesn’t alter the truth that the underlying asset stays topic to regulation inside real-life jurisdictions. Each authorized authority imposes its personal legal guidelines on who ought to be capable of buy, personal, or promote numerous belongings.
Such limitations can negatively influence the emergence of secondary markets in addition to the method of lively buying and selling. On some events, an absence of readability relating to regulation can act as a barrier much like liquidity.
Insecure swimming pools of liquidity
The provision of liquidity sometimes concentrates round sure markets, guaranteeing that pricing and change turn out to be comparatively straightforward processes. By tokenizing an asset, such swimming pools of liquidity may very well be fragmented throughout a number of chains, exchanges, or issuers of tokens.
If liquidity is unfold throughout numerous places quite than being concentrated in a single pool, every separate pool might be much less liquid, with larger worth slippage. The result’s a extra scattered ecosystem the place liquidity exists in concept however is much less efficient in apply.
Adoption obstacles and problems with belief
Liquidity of an asset is just not solely decided by provide and demand but in addition is dependent upon problems with belief within the buying and selling system. Within the case of tokens, all three features should be trusted: the token issuer, the market itself, and the laws that backs up the token.
If these components are unfamiliar or lack confirmed credibility, traders could also be cautious. That is very true for institutional traders who usually tend to be glad solely when there may be regulatory certainty.
The Phantasm of “All the time-On Markets”
One of many extra ignored claims relating to asset tokenization is that it fosters round the clock markets because of the fixed operation of blockchain expertise. At first look, that is certainly a vital enchancment over typical markets the place buying and selling can solely happen throughout designated hours.
Nevertheless, there’s a vital distinction between market accessibility and precise market exercise. Whereas blockchain techniques function on a 24/7 foundation, this doesn’t imply that contributors will have interaction in buying and selling, add liquidity, or successfully worth belongings. In different phrases, the system could also be up and working with out having the market itself being adequately liquid.
The true liquidity issue nonetheless depends on the next:
Market makers that continually give costs
Fixed involvement of the traders
Capital move that facilitates buying and selling processes
In any other case, even when tokens can at all times be purchased available on the market, they don’t have sufficient depth within the order ebook.
What this implies is that there’s a slight false impression right here. As a result of buying and selling is at all times doable, individuals assume that liquidity should even be fixed. Nevertheless, what would possibly really exist is availability with out depth, and markets which are out there however not essentially working effectively.
The confusion right here lies within the mixing up of technical uptime and liquidity. Whereas tokenization ensures that transactions occur at any time, this doesn’t essentially imply that there might be ample demand or provide out there.
In that sense, “always-on markets” usually are not routinely liquid markets; they’re merely markets that by no means shut, even when participation is low.
RELATED: Is Tokenization All That It’s Cracked Up To Be?
What This Means for the Way forward for Tokenized Markets
As a substitute of specializing in its failures, the lesson from asset tokenization could very effectively be considered one of altering our expectations on how market improvement proceeds. Maybe the largest change right here is that the outcomes of any market exercise stay extra influenced by the underlying financial situations quite than any design options in expertise.
This suggests that the subsequent wave of economic tokenization could not see a generalized improve in liquidity for every type of belongings. Moderately, such actions would revolve round sure niches the place there may be already present participation and the place infrastructure positive aspects may be iteratively compounded.
On this respect, tokenization could develop into extra of a filtering course of, whereby some belongings show to naturally facilitate buying and selling environments whereas others don’t, irrespective of their technological development.
It implies that the long run progress could not rely closely on the event of tokenization alone, however quite on recognizing the place it really resonates with market actuality.
Are Expectations Round Tokenization’s Impression on Market Liquidity Being Overstated?
Sure, however not as a result of tokenization lacks worth. The problem is that it’s usually anticipated to unravel liquidity issues in a uniform method throughout very several types of belongings. In actuality, illiquidity isn’t a single, uniform drawback. This may increasingly outcome from low demand for the asset, lack of historic commerce expertise, or extra elementary challenges related to how some kinds of belongings are owned, valued, and traded. As these elements fluctuate, the consequences of tokenization might be erratically distributed primarily based on the particular market being focused.
Right here, assumptions differ drastically. For instance, if there may be a lot participation and buying and selling out there, the method of tokenizing the asset turns into rather more efficient due to good mechanisms and decreased prices. Nonetheless, if participation is low by definition, then making an asset a token doesn’t routinely make buying and selling improve.
In the end, an important false impression about asset tokenization is to treat it as a common repair for liquidity. In actuality, liquidity is created by collaborating constantly, interacting with costs, and investing sources. The absence of those components implies that tokenized markets can function completely effectively technologically, however they are going to lack significant financial depth.
Disclaimer: This text is meant solely for informational functions and shouldn’t be thought-about buying and selling or funding recommendation. Nothing herein must be construed as monetary, authorized, or tax recommendation. Buying and selling or investing in cryptocurrencies carries a substantial danger of economic loss. All the time conduct due diligence.
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