Tokenized real-world assets are trying to connect two systems that run on very different clocks: always-on, permissionless DeFi protocols on one side, and traditional funds on the other, where settlement follows manager-defined windows and access is limited to approved holders.
In a commentary written by Prathik Desai and translated by Block unicorn, the central argument is that the biggest value in this market may sit with the coordination layer that keeps those two worlds working together.
RWA pools top $33 billion as the market broadens
The article says tokenized RWA pools now exceed $33 billion. About $15 billion of that total is in tokenized U.S. Treasuries, though their share has fallen from 55% to below 45% over the past year.
At the same time, other tokenized fund categories have grown, including institutional credit funds such as Apollo’s ACRED and private credit funds such as Janus Henderson’s JAAA.
Desai writes that the maturation of tokenization is giving treasurers and CFOs a wider menu of cash-management options. Lower-risk, lower-yield, high-liquidity capital can go into Treasury funds, while investors seeking higher returns and stronger programmability can move into riskier products. He also notes that Treasury-backed instruments are audited by the same firms that audit traditional bonds.
Why composability is the key distinction
Asked to distinguish offchain money from onchain money, Desai points to composability. In his framing, a dollar onchain can do more across multiple channels, making capital more efficient and increasing compounding potential.
Traditional finance usually forces a trade-off between yield, liquidity and transferability. Tokenized funds, he argues, can potentially combine all three if they are structured and operated correctly. That caveat matters. The problem is less about marketing the concept and more about engineering the system.
A tokenized money market fund is still a fund
The article stresses that tokenized money market funds are not stablecoins. They still have to operate like funds.
That means daily NAV updates on the fund manager’s schedule, a KYC-verified holder base, and redemption deadlines because the underlying Treasuries still settle through offchain infrastructure. The settlement cutoff cited in the piece is 5 p.m. Eastern Time.
Two examples are used to show how these restrictions work in practice: BlackRock’s BUIDL carries a $5 million minimum investment, while Circle’s USYC is limited to non-U.S. persons.
Desai argues that these constraints are not optional product features. Remove daily NAV settlement and the product is no longer a money market fund. Remove the whitelist and the U.S. Securities and Exchange Commission could step in.
Three friction points define whether tokenized funds can really scale
The article references a recent joint report from LayerZero and Centrifuge and groups the core operational challenge into three friction points.
1. Pricing between NAV updates
What is the token worth between two NAV calculation windows? Some issuers freeze the token price at the previous day’s level. Desai says that approach can be manipulated when rates move intraday. A continuously changing price is harder to game, but also harder to reconcile with the fund’s official books.
2. Where compliance checks are enforced
If whitelist verification runs on every transfer, the token cannot really reach open DeFi and can only move between approved wallets. The alternative is to embed compliance in a vault that holds the regulated fund shares and issues a freely transferable receipt token to holders who have already completed KYC once.
That receipt token can then interact with DeFi, while compliance remains at the vault layer instead of being checked on every transfer. Desai cites Centrifuge’s deRWA framework as an example.
3. Keeping ownership and value synchronized across chains
If a tokenized fund is deployed across nine chains, a single source of truth is needed for ownership and valuation. Onchain systems can update quickly, but differences between chains still have to be reconciled. More chains mean more failure points.
LayerZero and Centrifuge use a hub-and-spoke structure
To address that issue, the article says LayerZero and Centrifuge use a hub-and-spoke model. One authoritative chain handles NAV, accounting and compliance. A messaging layer, coordinated by LayerZero in this case, pushes those updates to the spoke chains where tokens are actually used.
Centrifuge’s V3 architecture is described as being built around that model. Each pool selects a central chain as its data source, while satellite chains function as distribution endpoints for deposits and enable DeFi composability. LayerZero carries the operational data needed to synchronize NAV updates, compliance instructions and cross-chain balance states.
Desai’s point is straightforward: the participant that can preserve a fund’s authoritative state across chains becomes hard to replace. Fund managers still control the time-based logic of the product, and blockchains still provide composability, but someone in the middle has to make both work at once.
Assets in transit are the most fragile part of the system
The piece says the weakest point in cross-chain asset movement is accounting for positions while they are in transit. During that window, assets can temporarily disappear from the visible balance sheet of the fund.
Centrifuge V3 is described as issuing tokenized confirmations for assets in motion, so the fund’s balance sheet can remain continuous even before the underlying token transfer is fully completed. Desai compares that mechanism to trade-date accounting onchain.
Looping strategies depend on reliable infrastructure
The article also outlines one way institutions might optimize idle cash through tokenization. A treasurer could deposit capital into a tokenized Treasury fund, post that position as collateral to borrow stablecoins, and earn a spread if the borrowing rate stays below the fund yield. The borrowed stablecoins could then be deployed into other yield sources and the process repeated.
But the strategy only works if the earlier pricing, compliance and settlement frictions are resolved. That, Desai writes, is the next major task for tokenization infrastructure builders.
Risks already visible: stale NAV arbitrage, redemption gates and messaging failures
The article lists several operational failure modes. One is stale onchain NAV pricing in smaller tokenized products. If prices stay fixed for two to four hours while the underlying assets move, an arbitrage window can open before the next NAV jump.
Another is a conflict between onchain redemption logic and offchain liquidity limits. If offchain NAV triggers a redemption gate while an independent smart contract continues to process redemptions immediately, the contract can end up holding stranded or unexecuted token transactions that keep trying to settle against an offchain cap.
Desai says large private credit funds and business development companies are already facing related pressure. Three weeks ago, Apollo Global’s $26 billion Apollo Debt Solutions Fund, or ADS, capped redemptions at 5% after investors sought to redeem about 16.8% of the fund. The piece also notes that investors withdrew $15.6 billion from widely held private credit funds in the second quarter, up from about $13.9 billion in the previous quarter.
Cross-chain messaging can fail as well, leaving positions only partially settled. Desai writes that institutional trust will depend on continuous monitoring of each failure mode and on qualified personnel overseeing those processes.
The value of the coordination layer
The article closes by arguing that tokenization is not just about putting U.S. Treasuries onchain or inventing a new asset category. The real goal is to break the old trade-off that forces investors to choose between yield, liquidity and transferability.
Desai compares that role to existing financial coordination layers. He writes that SWIFT’s value and influence exceed those of either side of the network it serves today, and that Visa is worth more than all the banks in its network except JPMorgan.
In that framework, Centrifuge is defining the fund-side role, while LayerZero is building the bridge that links each part of the system.