Why the regulatory architecture of real-world asset tokenisation matters: Opinion
Source: Business Times
Article Date: 15 Apr 2026
The challenge to institutional adoption is legal rather than technological.
Real-world asset (RWA) tokenisation is the process of representing ownership rights in tangible and financial assets – real estate, bonds, commodities and private credit – as digital tokens on a blockchain.
Each token encodes the legal and economic rights of the underlying asset, enabling fractional ownership, programmable transfer and digital settlement.
The technology is often celebrated for its promise of liquidity and efficiency. But that framing obscures a more fundamental question: tokenisation does not create new asset classes; it reconfigures how legal rights are represented, transferred and enforced. Whether the legal architecture underpinning those tokens is sufficiently robust for institutional-scale adoption is therefore the central question.
The on-chain RWA market has grown from around US$5 billion in 2022 to more than US$30 billion by Q3 2025. Yet, as noted in a Bank for International Settlements working paper, most tokenised assets exhibit low trading volumes and limited secondary-market activity – suggesting that issuance and tradability are not the same thing.
Three conclusions follow: regulatory convergence on a functional, technology-neutral approach is a precondition for institutional adoption; tokenisation is scaling within permissioned, regulated ecosystems rather than through disintermediation; and the binding constraints are legal rather than technological.
Regulation as enabling infrastructure
Across major jurisdictions, regulators have converged on a substance-over-form principle: same activity, same risk, same regulation.
A token’s legal character is determined by the rights it confers, not the technology through which it is issued.
In Singapore, this translates into a multi-regime regulatory framework: tokens representing capital markets products fall within the Securities and Futures Act; digital payment tokens are regulated under the Payment Services Act; commodity-backed tokens may engage the Commodity Trading Act.
In the EU, the Markets in Crypto-Assets (MiCA) Regulation governs non-security tokens, while the Markets in Financial Instruments Directive 2014 covers tokenised securities. The boundary is not always clear in advance.
A token that crosses into “transferrable security” territory exits MiCA entirely, triggering retroactive registration obligations, enforcement risk and investor liability. Misclassification is not a technical error but a legal one with material consequences.
Regulatory clarity therefore functions as market infrastructure, not merely a compliance overhead. Supervisory approvals carry more weight for institutional participants than technological milestones.
Institutional adoption: permissioned ecosystems, not disintermediation
The trajectory of institutional tokenisation confounds early predictions of disintermediation. Adoption is deepest where tokenisation integrates with existing financial infrastructure and securities regulation.
In February, Hong Kong-listed DL Holdings Group announced its receipt of approval from the Securities and Futures Commission on its RWA tokenisation strategy. It involves the tokenisation of fund interests linked to its commercial building DL Tower and Animoca brands.
The Monetary Authority of Singapore’s Project Guardian further illustrates the logic: pairing regulatory clarity with active supervisory participation has attracted major financial institutions to pilot use-cases precisely because the regulatory perimeter is legible.
Atomic settlement eliminates counterparty exposure embedded in T+3 (trade date plus three working days) cycles. Programmable compliance – embedding transfer restrictions and Know Your Customer/Anti Money Laundering checks directly into token logic – reduces manual processing risks.
SDAX Exchange, for example, has improved market access for established listed companies such as Intraco and Straits Trading Company by launching their commercial paper issuances on its permissioned-blockchain platform. Its gold-backed tokens allow clients to turn static commodity holdings into liquid assets.
Based on RWA.xyz, an industry analytics platform, private credit is the largest non-stablecoin RWA segment at around US$14 billion as at mid-2025, followed by tokenised US Treasuries at US$7.4 billion. This was led by BlackRock’s BUIDL fund and Franklin Templeton’s tokenised money market fund.
These are instruments held to maturity, not actively traded – tokenisation is generating value primarily as an issuance and custody efficiency tool, not yet as a secondary-market liquidity mechanism. This explains the prevalence of tokenised debt and fund structures currently seen in offerings in Singapore.
The binding constraints: legal, not technological
Tokenisation is widely seen as a technological challenge – a matter of building better infrastructure and smarter code. In reality, the harder obstacles are legal.
On enforceability, courts in Singapore and other common law jurisdictions have recognised digital assets as property and adapted remedies to on-chain contexts, including a 2024 Hong Kong High Court order to tokenise and deploy an injunction onto an illicit wallet on the public blockchain.
Yet limits are equally important. Smart contract logic cannot wholly substitute for contractual risk allocation. Provisions addressing coding errors, oracle failures and governance changes must be explicitly drafted.
On custody, the structural risks are underappreciated. Owning a digital token representing an asset does not automatically mean you legally own the underlying asset itself.
In most tokenisation programmes, the token represents a contractual claim on a special purpose vehicle, trustee or custodian – not direct legal title.
Unless national law recognises the distributed ledger as the authoritative title register, courts treat token ownership as evidence of beneficial interest rather than proof of title.
Enforceability therefore depends on off-chain custody documentation. Custodial concentration – when a small number of centralised institutions hold the majority of underlying physical assets or private keys for tokenised assets – compounds this risk.
Cross-border fragmentation adds a further dimension.
Conflict-of-laws questions around governing law, insolvency jurisdiction and foreign judgment recognition remain largely untested.
A further gap deserves attention: secondary market liquidity.
Whitelisting requirements, investor eligibility restrictions, limited regulated venues and valuation opacity collectively constrain the tradability that tokenisation theoretically enables.
This is a legal and market-structure problem requiring regulated venues, standardised transfer protocols and interoperability frameworks that do not yet exist at scale.
From ledger to law
Tokenisation is entering a phase of institutional consolidation. Success will belong to institutions that treat it as a legal and operational design challenge rather than a technological one.
The legal wrapper is critical to the success of tokenisation.
That means getting the alignment right between on-chain tokens and the off-chain legal title, structuring governance contractually, and ensuring custody holds across jurisdictions and through insolvency.
Both writers are from RHTLaw Asia. Ch’ng Li-Ling is partner and Tan Chong Huat is senior partner and chairman. Tan is also non-executive chairman of SDAX Exchange.
Source: The Business Times © SPH Media Limited. Permission required for reproduction.
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