Tokenisation has been hailed as the future of finance, promising to unlock liquidity for traditionally illiquid assets like real estate, private equity, and debt instruments. However, as the market matures in 2025, a critical reality is emerging: being “tokenised” does not automatically mean an asset is easily tradable. Despite the surge in issuance and regulatory progress, liquidity risks remain a major hurdle for tokenised assets, affecting both institutional and retail investors.
The Liquidity Illusion: Tokenisation vs. Tradable Markets
Tokenisation enables fractional ownership and instant settlement, theoretically making assets more accessible and liquid. Yet, the reality is more complex. Many tokenised assets—especially debt and real estate—see daily trading volumes below 5% of their issued supply, far below the liquidity of traditional securities. This gap is due to several factors:
- Limited secondary markets: Most tokenised assets are traded on niche or permissioned platforms, not open exchanges.
- Custody and valuation issues: The underlying asset often remains off-chain, complicating custody and transparency.
- Regulatory uncertainty: 67% of firms cite regulatory ambiguity as a barrier to liquidity.
- Interoperability challenges: Lack of cross-chain compatibility hinders seamless trading.
Key Liquidity Risks in 2025
1. Low Trading Volumes: Tokenised debt and real estate instruments frequently trade at less than 5% of their total supply per day, compared to traditional securities that can see daily turnover of 20–30%. This means investors may struggle to exit positions quickly, especially during market stress.
2. Custody and Transparency: Most tokenised assets rely on issuer custody, with the underlying asset held off-chain. This creates opacity and valuation challenges, affecting investor confidence and liquidity.
3. Regulatory Fragmentation: Cross-border regulatory differences complicate compliance and limit market access. Only 60% of authorities view tokenised assets as eligible under existing securities frameworks, and regulatory sandboxes are still evolving.
4. Interoperability and Technology: Blockchain fragmentation and lack of standardised protocols make it difficult to move assets between platforms, reducing liquidity and increasing operational risk.
Market Trends and Institutional Adoption
Despite these challenges, institutional interest in tokenised assets is growing. Over 60 tokenised bonds have been issued globally, totaling around $8 billion in value, with tokenised U.S. Treasuries surpassing $7.4 billion in 2025. Asset managers are increasingly allocating to tokenised assets, with 57% planning to do so in 2025.
However, adoption remains uneven. Tokenised equities lag behind debt and real estate, with trading volumes at about 30% of those sectors. Secondary markets for tokenised equities show daily liquidity below 7% of outstanding tokens.
Why Liquidity Matters
Liquidity is crucial for market stability and investor confidence. Low liquidity can lead to:
- Price volatility: Thin markets are more susceptible to price swings.
- Redemption risks: Investors may not be able to exit positions quickly, especially during market stress.
- Systemic risk: If tokenised assets become a significant part of the financial system, liquidity mismatches could pose broader financial stability risks.
FAQs
- What is the main liquidity risk for tokenised assets?
The main risk is low trading volumes, making it difficult for investors to exit positions quickly. - Why are tokenised assets less liquid than traditional securities?
Limited secondary markets, custody issues, regulatory uncertainty, and lack of interoperability all contribute to lower liquidity. - Are tokenised assets safe for institutional investors?
Institutional adoption is growing, but risks remain due to regulatory, custody, and liquidity challenges. - Will liquidity improve as tokenisation grows?
Liquidity could improve with better regulation, interoperability, and market infrastructure, but it remains a key bottleneck.
