Risks of Tokenized Real-World Assets: What Can Go Wrong

A tokenized asset is only as good as the chain of promises between your wallet and the asset. Each link in that chain is a place where something can go wrong. Here are the main risks, roughly in the order they matter.

1. The underlying asset

The token inherits the asset’s own risks. A gold token falls when gold falls. A private credit token loses money when borrowers default. A tokenized stock follows the stock. Tokenization doesn’t remove any of this.

2. Issuer and legal structure

Your claim is a legal one: shares in a fund, units of a trust, a note from a company. Questions to ask:

• Is the asset held in a bankruptcy-remote entity, separate from the issuer?
• Which jurisdiction’s law applies, and could you enforce your claim there?
• Is the token itself the legal record of ownership, or does an off-chain register override it?

3. Custody

Someone holds the real asset: a bank, a broker, a vault. Look for regular attestations or audits from recognized firms, and for how often they’re published. Monthly attestation is common; real-time proof of reserves is rarer.

4. Smart contracts and chains

Token contracts can have bugs, and admin keys can be compromised. Multi-chain products add bridges or separate deployments, each with its own risk. Most RWA tokens also have admin powers to freeze or reverse transfers, which is needed for compliance but means the issuer controls your tokens in the end.

5. Oracles and pricing

DeFi apps that accept RWAs as collateral need a price. If the price feed is stale or wrong, liquidations can happen at the wrong time. Fund tokens that only update their price once a day are especially exposed.

6. Liquidity and redemption

Most tokenized assets are redeemed through the issuer, on the issuer’s schedule, often only for approved investors. Secondary markets are usually thin. In stress, you may not be able to exit at the asset’s fair value.

7. Regulation

Rules for tokenized securities are still being written in most countries. A product’s eligibility rules, or whether it can be offered at all in your country, can change.

A quick checklist

1. What is the asset, and who holds it?
2. What legal claim does the token give me?
3. Who audits or attests the backing, and how often?
4. Can the issuer freeze my tokens, and when?
5. How do I redeem, and what are the limits?
6. Am I eligible to hold it where I live?

Every asset page on RWA Tracker links to the issuer and its sources, so you can check these points yourself. See also who can buy RWAs.