While the real world asset (RWA) tokenization industry is growing rapidly, Tristero Research has released a report about the dangers of turning tangible assets like loans, real estate, and commodities into tokens. RWA tokenization has surged from $85 million in 2020 to $25 billion in 2025, a 240x increase. Additionally, many experts anticipate that space will reach $16 trillion by 2030.
The report, shared on September 3, states that RWA-squared products, such as structured products, indices, and synthetics, could make the system less stable, which could make the financial markets less reliable.Tristero blames oracles, collateral rules, weak compliance frameworks for a potential “on-chain subprime crisis.”
The report states that these assets are sold as tokens that can be traded around the clock, but because they are not liquid, they create a dangerous liquidity paradox. “Tokenization doesn’t change the fundamental nature of an office building, a private loan, or a gold bar. These are slow, illiquid assets—legally and operationally bound by contracts, registries, and courts,” the report reads, “What tokenization does is wrap them in hyper-liquid shells that can be traded, leveraged, and liquidated instantly. The result is a financial system where slow-moving credit and valuation risks are converted into high-frequency volatility risks, with contagion that spreads not over months but minutes.”
2008-like Scenario for Crypto?
Highlighting the 2008 financial crisis, spearheaded by Subprime mortgages in the U.S. Banks, Tristero states that it put risky home loans into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs). These investments seemed safe because they had high ratings (AAA) and were traded with significant capital, but the mortgages that backed them up were not liquid.
For a hypothetical scenario, imagine a private credit protocol that tokenizes $5 billion in SME loans, offering 8-12% yields and used as collateral on DeFi platforms like Aave and Compound. When the real economy sours and defaults rise, the loan book’s true value drops, but a lagging monthly-updated oracle keeps the token’s on-chain price stable.
At this time, whispers of missed payments spark a sell-off, causing the market price to slip below the official value, breaking the peg. This triggers automated liquidations on DeFi protocols, as bots repay loans, seize and dump collateral, driving prices lower and fueling a rapid feedback loop that transforms a gradual credit issue into a full-blown on-chain crash.
This Liquidity Paradox, strapping illiquid assets onto hyper-liquid markets, increases fragility and reflexivity. “The same tools that make markets faster and more transparent also make them more exposed to sudden shocks,” the research cites.
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