Real-world assets onchain are gaining traction, with stablecoins leading the way. Annual transfers of stablecoins surpassed Visa and Mastercard by 7.7% last year, showing their dominance in onchain volume. Tokenized US Treasurys are attracting interest from institutions seeking yield.

Stablecoins have evolved into financial infrastructure, enabling programmable money for various applications. However, many tokenized assets lack integration into decentralized finance (DeFi) ecosystems, leading to parked capital instead of liquidity. Legal classification constraints also hinder the movement of assets within DeFi.

The GENIUS Act’s passage in the Senate establishes a federal framework for stablecoins backed by Treasurys, signaling compliant digital assets moving into institutional finance. This shift will enable real-world assets to become usable financial instruments rather than static representations.

Despite the potential for liquidity in real-world assets, current tokenized assets face challenges in trading due to limited interoperability across DeFi. Liquidity lags as regulated assets struggle to move freely, and markets remain siloed without composability.

Institutions require purpose-built infrastructure for real-world asset integration, where compliance is structurally integrated, connecting seamlessly to liquidity, custody, and reporting. This upgrade is essential to make blockchain migration worthwhile for institutions.

DeFi protocols face the challenge of adapting to support real-world assets with constraints, as many remain siloed and unable to participate in lending markets or yield strategies. New primitives are emerging to bridge compliance and usability, making real-world assets functionally relevant within DeFi.

Institutions need to develop a tokenization strategy to participate in the emerging tokenized economy effectively. Platform thinking is crucial, as building infrastructure for others to build upon is more valuable than simply digitizing assets. Early recognition of this shift will position institutions to control the tokenized economy’s future.

Read more at Cointelegraph: RWAs Build Mirrors Where They Need Building Blocks