Two recent cases are drawing attention to the practical limits of real-world asset tokenization, or RWA, even as the sector stays in focus.
In an article published by Foresight, one case came from remarks by the founder of StableStock in an interview. The founder said an on-chain brokerage is not an easy business to run. The other case involved a crypto real estate platform that announced liquidation and closure.
On-chain brokerages are gaining attention, but the barriers are substantial
Foresight described on-chain brokerages as one of the hottest businesses in the current RWA market. The model is already familiar to many crypto users. The article cited the slogan of the recently rising “Robinhood chain,” which aims to bring stocks onto the blockchain, build a synchronized on-chain and off-chain market, and create a full trading ecosystem.
From a user’s point of view, the gap between trading stocks on-chain and trading them in traditional markets is mainly seen in two areas: the trading medium, meaning fiat currency versus stablecoins, and the trading venue, meaning traditional exchanges versus blockchains.
For people who have spent a long time inside the crypto ecosystem, Foresight said, those differences may not look especially difficult. At most, they may require some adjustment. That can easily lead to a broader assumption that if users can adapt, the businesses offering these services should also face only limited friction.
The StableStock founder, however, laid out a different picture in the interview. As summarized in the article, at least four major barriers stand out.
Licensing and regulatory procedures
The first is the need to apply for securities-related licenses or financial services licenses. Regulatory procedures and rules differ across jurisdictions. The article said the process usually becomes longer and more complicated for any platform that wants to expand its business scope and serve a wider user base.
Business models are still being tested
The second issue is that the revenue model is still under exploration. The interview mentioned two ways to make money, but based on the tone cited in the article, neither has been tested enough, and uncertainty remains.
Compliance drives up staffing and administrative costs
The third challenge comes from compliance demands. Foresight said these requirements can sharply increase labor costs and administrative expenses. Those costs may not be obvious in the product interface, but they can weigh on operations and expansion.
Volatility and liquidity remain difficult
The fourth challenge comes from the products being traded. Price volatility and liquidity conditions can both create pressure for on-chain brokerages.
Looking like DeFi does not remove real-world friction
Foresight argued that even if an on-chain brokerage can achieve a DeFi-like form, the business still carries substantial friction tied to regulation and centralized operations.
The article added that some platforms now appear close to DeFi and offer smooth trading experiences that attract a large number of users. In its view, a deeper reason may be that regulators have not yet turned their full attention to them, allowing these platforms to avoid heavy spending of time and resources on regulatory matters for now. Once regulatory scrutiny begins, the article said, the barriers and friction costs are likely to rise. It described that outcome as a matter of timing.
RealToken’s liquidation exposed another side of RWA risk
The second case centered on RealToken, or RealT, a crypto real estate company. Its main business was to tokenize rental income from properties in places including Detroit into ERC-20 tokens. Investors who bought those tokens would receive a share of the rent.
Because of U.S. regulatory restrictions, the article said, the business could not be offered to U.S. residents and was limited to users in other regions.
RealToken later ran into deeper trouble. According to Foresight, properties held by the company became the subject of lawsuits from the city of Detroit over unpaid taxes, water bills, and code violations. As a result, rental payments could no longer be distributed normally, and the company had to liquidate and shut down.
Restricted user access and trouble in the underlying business
Foresight said RealToken’s core problems were concentrated in two areas.
The first was again regulation, which limited the potential user base.
The second was that the real business behind the tokens developed serious problems of its own. The article used that outcome to make a broader point: RWA changes the form of an asset, but it does not change the substance of the business. If the underlying business is weak, wrapping it in tokenized form does not fix it.
Both cases point to the same structural issues
Although on-chain brokerages and tokenized real estate do not appear to be closely related at first glance, Foresight said both examples reveal two common issues worth watching.
- First, regulation can impose very large costs on RWA businesses, especially hidden costs. In one case, those costs show up as higher operating expenses. In another, they appear as a restricted customer base and a harder path to running the business.
- Second, the current RWA business model does not appear to offer major independent innovation. It remains closely tied to traditional business models and, in some cases, is simply an extension of them. Tokenization may change the outer structure, but if the core model is weak, putting it on-chain does not solve the problem.
The original article also included a risk warning, saying the market carries risk and that the content does not constitute investment advice.