A Developing Market Catching Up With Its Legal Framework
The data available to date reveals a lot of information about this fast-developing market. The tokenized real-world asset market has recently grown to an approximate $24.9 billion total market value, growing almost 4x in 12 months. It is projected that it will reach a total of $30 trillion by 2034.
However, upon digging deeper, it becomes clear there are more variable reasons than one might initially think for such growth. This upheaval was primarily driven by two types of investments (excluding stablecoins): tokenized US Treasuries (now ~ $11 billion) and commodities (~$5.1billion). Both illustrate how institutional capital is increasingly flowing into on-chain yield-bearing assets as opposed to just pure speculation.
This shows that the infrastructure is slowly but surely being rebuilt. However, despite all of this growth, there continues to be a major inconsistency in the marketplace:
- The blockchain maintains a ledger for token balances and transfers.
- The courtroom system determines whether those tokens legally belong to the holder of the token in accordance with the law.
The inconsistency in the legal enforceability of smart contracts is where the bulk of issues with real-world asset tokenization begins.
If RWAs Are Growing So Fast, What’s Holding Them Back?
RWAs have the potential for substantial growth but are currently hindered by a lack of liquidity in the marketplace. According to multiple academic and industry publications, although tens of billions of dollars’ worth of tokenized assets have recently moved to the blockchain, there is very thin secondary market activity.
Resale involves low volumes of trading, long holding periods, and minimal investor participation. As a result, despite a mounting number of institutional players entering the space, RWAs remain illiquid.
Why?
Because liquidity is not determined solely by technological capabilities, it also depends on the smart contract legality and the structural certainty of the asset class.
When ownership or claim rights are not clearly enforceable, tokens are treated as an expression of intent rather than fully realized assets.
Are Tokens A Sign of Ownership?
In many cases, this assumption around smart contracts and real world assets falls apart. Across multiple legal jurisdictions, courts, regulators, and legal practitioners agree: A token on a blockchain does not by itself grant legal ownership of a real-world asset.
In practise:
- Ownership of real estate must be recorded in a government land registry and must adhere to local property laws.
- Securities require an intermediary to hold the assets, a transfer agent, and a compliant structure.
- Physical assets, such as commodities, require off-chain custody and binding contracts.
Even when tokens transfer instantly on-chain, legal title often does not follow.
“RWAs are considered evidence of ownership or equity and hence do not represent ownership of the underlying asset as such.”
For a large proportion of institutional applications, the rights are held in a Special Purpose Vehicle. They legally hold the assets – tokens represent equity, profit rights, or debt claims against the SPV.
Thus, the conclusion, though uncomfortable, is clear- the majority of institutional RWA tokens provide indirect claims on legal structures, not formal title to the backing asset.
What Did Courts Actually Say About Smart Contracts?
The theoretical discussion around smart contracts legal issues changed significantly when appellate courts intervened.
In Van Loon v. U.S. Department of the Treasury, the U.S. Court of Appeals for the Fifth Circuit held that Tornado Cash’s immutable smart contracts are not classified as “property” under IEEPA (International Emergency Economic Powers Act). As they cannot be legally owned or possessed by any identifiable party, they do not satisfy the traditional definition of the term.
The ramifications are specific but far-reaching. If something can’t be legally owned, it becomes extremely difficult to regulate or enforce restrictions using property-based legal tools like asset blocking, seizure, and transfer of title. Legal analyses that followed provide clarity around this enforcement issue.
“There can be no enforcement methods (both private and regulatory) if smart contracts cannot be linked back to a legal actor or entity.”
This point does not put a period on the “code is law” narrative; however, it does change its context. Enforcement – particularly in cases involving disputes, fraud, sanctions, and insolvency – still occurs off-chain through courts and other organized, recognized legal systems.
If Code Executes Perfectly, Why Do We Still Need Law?
Just because code runs exactly as intended does not mean it solves every problem related to the legal risks of smart contracts. In 2025, stolen cryptocurrency assets totaled around $2.7 billion, with broader estimates reaching as high as $3.4 billion.
Even a perfectly executed smart contract would not have prevented:
- The theft of assets, due to compromised private keys or exploits at the protocol or infrastructure level
- Unauthorized transfers resulting from malicious transactions that still met the on-chain conditions
- Custodial failure or insolvency leading to off-chain mismanagement or misappropriation
- The irrevocable outcomes sealed by the code’s finality
When something fails on a large scale, realistically, there are two possible responses:
- Accept the loss (Code is law)
- Seek legal intervention to override or unwind code-based outcomes where possible.
Most institutional players pursue legal strategies through contractual protections or regulators, not assuming that the philosophy of “Code is Law” is going to help them recover from losses.
The Future: Hybrid On-Chain and Off-Chain Solutions
The future of tokenization will combine both on-chain and off-chain elements. Originally, the notion of code as law was appealing; it promised a world where automation replaces intermediaries and eliminates the need for trust.
In reality, real-world assets do not exist in such a purely digital realm.
Before they can exist in tokenized form, alignment with a core legal framework for smart contracts, jurisdictional frameworks, and regulatory rules must already be in place to govern them. Already, the market is demonstrating this.
The architectures that succeed – those providing scalable systems for tokenized assets- will implement existing legal systems with blockchain.
That’s where platforms such as Blockmaze come to play because they offer compliant and hybrid RWA ecosystems that use both on-chain and off-chain legal layers, ensuring code enforceability syncs with legal compliance needs.
Ultimately:
- Code will execute;
- The law will enforce
Thus, the future growth and adoption rate of tokenized assets depend upon embedding this hybrid understanding as part of the tokenization process itself.