Tokenizing real-world assets (“RWA”) – from real estate and fine art to gold and intellectual property (”IP”) – has moved from a niche experiment to one of the fastest-growing segments in finance. In 2024-2025, major players jumped in: Coinbase is seeking SEC approval to trade tokenized stocks 24/7, Backed Finance announced “xStocks” tokenized equities (available via Kraken and on Solana), real estate is being fractionalized on blockchains (even on the XRP Ledger in Dubai), and Republic sold tokenized economic rights in pre-IPO shares of SpaceX and other unicorns. The global on-chain RWA market has quintupled from around $5 billion in 2022 to about $24 billion by mid-2025. Consulting firms predict that tokenized assets could reach $2 trillion in value by 2030.

Yet despite the hype and rapid growth, legal and regulatory frameworks are struggling to keep up. There is no unified “RWA law” in any given jurisdiction. Instead, projects must navigate a patchwork of existing securities, commodities, funds, and banking regulations built for traditional finance. This fragmented legal framework means high uncertainty. Any RWA token venture should begin with a thorough legal analysis and careful design of its structure.

1. RWA Tokenization: Benefits and Market Trends

What is “tokenization” of assets?

In essence, tokenization means creating a unique digital token on a blockchain that represents ownership or rights in an asset. The token can be transferred or traded, enabling fractional investment and 24/7 markets for assets that traditionally are illiquid or have high entry barriers. A token might represent a fraction of a piece of real estate, a bundle of rights to royalty income from an artwork, or a share in a pool of gold bars. By putting assets “on-chain,” tokenization promises improved liquidity, transparency of ownership (via an immutable ledger), faster settlement, and automated distribution of income through smart contracts. In other words, it can open a “digital vault” for real-world assets accessible globally, with the blockchain ensuring accurate tracking of ownership and enabling new financial use cases (like using a tokenized asset as collateral).

Why the excitement?

Tokenization’s key feature is fractional ownership. Investors can buy, say, 1% of a trophy asset, such as a skyscraper, a Picasso painting, or a rare wine collection, instead of having to buy the whole thing. This lowers entry costs and lets investors diversify into asset classes previously out-of-reach. While fractional ownership isn’t new (investment funds, trusts, and REITs have existed for decades), blockchain tech adds global accessibility, potential secondary market liquidity, transparency (an “on-chain audit trail”), and automation of transactions and payouts via smart contracts. In short, RWA token platforms aim to combine the legal substance of traditional finance with the technological efficiencies of crypto.

Yet, regulators have not issued RWA-specific rules. Instead, tokenized assets fall under existing financial regulations – often by analogy, leading to gray areas. While tokenization could unlock trillions in value, broad adoption requires navigating a regulation-heavy environment and integrating with traditional market infrastructure. In other words, legal compliance is now the critical success factor for RWA projects.

The next sections map out the key legal risks and frameworks that RWA founders, investors, and counsel need to understand.

2. Key Legal Risks in RWA Projects

Launching an RWA token project means navigating two worlds:

• The fast-moving frontier of blockchain, and
• The well-established frameworks of financial and property law.

Accordingly, the founders must be cognizant of several major legal risks from the outset.

Securities Law Risk

‍Many RWA tokens will be deemed “securities” by regulators, especially if investors expect profits from the efforts of the project team or a third party. Being a security triggers a host of regulations. In the U.S., the Securities Act of 1933 requires registration of public offerings or qualifying for an exemption like Regulation D or Regulation S. Non-compliance can lead to enforcement actions, fines, and rescission demands. This is the single greatest legal risk in most jurisdictions: if your token looks like a share, note, investment contract, or derivative, it will be regulated as such.

Investment Fund/Adviser Risk

‍If the project involves pooling investor money to purchase and manage assets with investors expecting passive income, it may be treated as an investment company or the team as investment advisers. For example, a token that gives holders a share of the project’s income is essentially a collective investment vehicle. In the U.S., an entity “primarily engaged” in investing or trading securities is an Investment Company under the Investment Company Act of 1940. Unless an exemption applies, it must register with the SEC and comply with strict requirements, such as disclosure, limits on leverage and fees, periodic audits. Similarly, providing investment advice about securities for a fee may trigger the Investment Advisers Act. RWA projects need to be structured carefully to avoid inadvertently becoming unregistered funds or investment advisers. We will discuss structuring options, including private fund exemptions, in Section 5.

Bankruptcy and Corporate Risk

‍Most tokenization models use a Special Purpose Vehicle (“SPV“) company to hold the asset and issue tokens. Investors then hold tokens that represent rights against that SPV, rather than direct title to the asset. This introduces typical corporate law risks. For example, if the SPV goes bankrupt or is mismanaged, token holders’ claims could be uncertain or subordinate to other creditors. The SPV structure, while necessary for legal reasons, means token holders must trust that entity and its management to safeguard the asset and honor the token rights. Robust corporate governance and possibly third-party trustees/custodians are needed to mitigate these risks.

Property Law and Records Risk

‍A token on a blockchain does not automatically equal legal ownership of a real-world asset. Transfer of many assets (real estate, vehicles, IP rights) still requires off-chain legal steps like notarized deeds or registry updates. Thus, a token sale might not legally transfer title unless accompanied by traditional paperwork. This disconnect can create uncertainty: the token might change hands on-chain, but the legal owner per the government registry remains the SPV or original owner until proper legal transfer. RWA projects must bridge this gap. They often do so by contractually obligating the SPV to transfer or by integrating with legal registries where possible.

Taxation Risk

‍Token issuers and investors face tax obligations that vary by jurisdiction. Income from the underlying asset, including rent, interest, royalties, could be taxable to token holders. Transferring or trading tokens might trigger capital gains taxes. Operating through an offshore entity could introduce corporate tax or withholding tax issues, and the tax residency of the SPV or investors could complicate matters. Both the project and token holders need to understand how income will be reported and taxed. In some cases, the act of tokenizing an asset, such as  moving it into a corporate structure, can itself have tax consequences. Careful tax planning is essential.

Cross-Border and Investor Location Risk

‍Even if a token is structured to be compliant in the home jurisdiction, offering it to investors in other countries can attract foreign regulation. Each investor’s jurisdiction may have its own view on whether the token is a security, commodity, fund unit, etc. For instance, a token not considered a security in one country might be deemed a regulated financial instrument in another. Projects aiming to be global must either (a) limit sales to certain “safe” jurisdictions or accredited investor classes, or (b) navigate compliance in multiple jurisdictions. The latter is a costly and complex undertaking. Notably, U.S. and EU investors are often subject to the most stringent rules, so many token projects restrict those users if they are not prepared to comply.

AML/KYC and Financial Crimes

‍Platforms dealing in asset tokens likely qualify as financial institutions under anti-money-laundering laws. In the U.S., for example, if the platform facilitates buying/selling tokens, especially if tokens are considered “value that substitutes for currency,” it may be a Money Services Business requiring FinCEN registration, KYC checks on users, and compliance with AML programs. The same goes for many other countries’ AML laws. Regulatory attention is high on crypto assets potentially being used for illicit purposes, so robust AML/KYC procedures are mandatory for any serious RWA project.

In practice, any project offering tokens with an economic interest or passive income will attract regulatory scrutiny. As the SEC and other regulators have said, simply wrapping an asset in a token doesn’t evade securities laws, since substance over form will prevail. RWA founders should proceed with extreme caution in jurisdictions like the U.S. and EU, where enforcement is active. In the next sections, we delve deeper into how these regulations apply in those key markets.

3. United States Regulatory Landscape

The United States has no single regulator or statute dedicated to “tokenized assets.” Instead, multiple federal and state agencies assert jurisdiction based on the token’s characteristics.

Securities

‍The U.S. Securities and Exchange Commission (”SEC”) is the most prominent regulator in the crypto space. Under U.S. law, “security” is defined broadly. Section 2(a)(1) of the Securities Act of 1933 includes not just stocks and bonds but also investment contracts and other instruments. The famous Howey test (from SEC v. W.J. Howey Co.) defines an investment contract as an investment of money in a common enterprise with an expectation of profits predominantly from the efforts of others. Many RWA tokens meet this test. For example, a token giving a share of rental income (common enterprise) where holders rely on a management company’s efforts to generate and distribute profit fits squarely into Howey. While Commissioner Hester Peirce has stated that not all tokens are securities, in the context of RWA, many such tokens, especially those providing rights to share in profits or income, are likely to be treated as securities under this framework. If a token is a security, any offer or sale must either be registered with the SEC (an IPO with prospectus disclosures) or qualify for an exemption. Common exemptions for token projects include Regulation D (private offerings to accredited investors) or Regulation S (offshore offerings to non-U.S. persons).

Commodities and Derivatives

‍The U.S. Commodity Futures Trading Commission (”CFTC") polices commodity markets and derivatives. The definition of “commodity” under the Commodity Exchange Act is also very broad. It covers all sorts of things from agricultural products and metals to financial indices and some digital assets (the CFTC has explicitly said Bitcoin and Ether are commodities, for example). However, simply being a commodity does not mean a token project falls under active CFTC oversight. The CFTC’s primary jurisdiction is over derivative instruments, such as futures, options, swaps, on commodities. Spot transactions, including buying/selling the commodity or token for immediate delivery, are mostly outside the CFTC’s remit, except in cases of fraud or manipulation. How does this apply to RWAs? If the project offers any kind of leveraged trading, futures contracts, or yield-bearing swaps involving the tokenized asset, then CFTC rules (and possibly exchange/trading venue registration requirements) come into play. For example, offering a token that represents a forward contract on an ounce of gold for future delivery would likely be treated as a commodity futures contract, requiring compliance with CFTC regulations. On the other hand, issuing tokens that simply give present claims to a vaulted bar of gold with no leverage or future delivery aspect might avoid CFTC issues. However, if those tokens are marketed like an investment with profits, the SEC might claim jurisdiction instead. In summary, RWA projects must be careful not to venture into derivatives unless prepared to deal with the CFTC. Many have avoided this by structuring tokens as spot ownership or debt instruments rather than futures/swaps.

Investment Company Act (1940)

‍As noted in the risk section, if your project pools investor funds to invest even in real assets, you could inadvertently create an unregistered investment company. The Investment Company Act defines an investment company very broadly (any issuer engaged primarily in investing, reinvesting, or trading in securities). Some RWA projects might argue that their tokens are not “securities” and the assets are real (like real estate or commodities). However, if those tokens are themselves securities or if the project holds any securities, it’s easy to trigger the definition. Consequences: If deemed an investment company, the entity must register with the SEC and comply with a host of requirements, including disclosure, restrictions on leverage and transactions with affiliates, limits on fees, unless an exemption applies. Two key exemptions often relied on in the crypto fund context are: (i) Section 3(c)(1), which limits the fund to no more than 100 investors, and (ii) Section 3(c)(7), which permits an unlimited number of investors, provided that all are “qualified purchasers” (roughly $5 million+ in investable assets for individuals). Some private RWA funds structure themselves to fit one of these exemptions.For example, an issuer might cap token holders at 99 persons or limit participation to institutions and very wealthy individuals to avoid being treated as an investment company. Additionally, if the RWA project operates a fund, the manager making investment decisions may also need to register under the Investment Advisers Act, unless an exemption applies (such as the one for private fund advisers managing under $150 million).

Other U.S. Rules

‍Depending on the asset and structure, numerous other laws can apply. Tax regulations, including withholding on certain payments, state taxes if real estate is involved, must be addressed. If tokenizing regulated assets like fine wine or collectible cigars, you must consider alcohol and tobacco regulations, such as ATF/TTB licensing for storage of liquor. If the platform holds customer funds or stablecoins, banking laws or money transmission laws might apply. FinCEN requirements for AML/KYC are practically certain, and any platform dealing with converting fiat to tokens or vice versa will need to implement a compliant AML program. State Blue Sky laws can also affect security token offerings, though complying with federal Reg D or CF often pre-empts state law for private offerings. In sum, doing business in the U.S. means a full-spectrum legal review. Many RWA startups in 2021-2022 avoided U.S. exposure due to these complexities. However, given the size of the U.S. market and investor base, founders often want at least the option to include U.S. accredited investors. The safest approach if targeting U.S. investors is a private, exempt offering, when  tokens offered under Reg D to accredited investors with restrictions on resale, combined with a robust legal structure, such as a Delaware master LLC with sub-entities as needed, or feeder funds, that stays within the lines of the 1933 and 1940 Acts.

4. European Union Regulatory Landscape

In the EU, a comprehensive crypto-assets regulation, Markets in Crypto-Assets Regulation (”MiCA”), was finalized in 2023 and took effect in stages through 2024–2025. MiCA creates a unified framework for offering and trading crypto-assets across EU member states. However, MiCA is not a blanket solution for RWA tokens. Crucially, if a token is considered a financial instrument, such as a “transferable security,“ under existing EU law Markets in Financial Instruments Directive II (“MiFID II“), then MiFID II applies instead and MiCA does not. In practice, this means EU law splits tokenized RWAs into two buckets:

• Security Tokens (under MiFID II): If an RWA token has the characteristics of a traditional “transferable security” under MiFID II’s definition, it will fall under the full panoply of EU financial services laws, including prospectus requirements, MiFID II rules on trading, transparency, just like stocks or bonds. What makes a token a transferable security? MiFID II defines it broadly to include any financial instrument that is negotiable on the capital market, including shares, bonds, fund units. For tokens, the test is whether it confers rights equivalent to traditional securities, such as profit participation, voting rights, ownership interest in an undertaking, or entitlement to a share of revenues. If a token gives investors a right to share in profits, income, or enterprise value – especially if it’s structured as a passive investment with centralized management – EU regulators will likely treat it as a security. Example: A token representing shares of an SPV, or a token giving 5% of the rental income from a property, would probably be deemed a transferable security, or perhaps a unit in a collective investment undertaking, in the EU. Once in this category, MiCA is out, and the traditional rules, such as MiFID II, Prospectus Regulation, govern the offering. Public offerings would require an approved prospectus unless an exemption applies (similar to the U.S. concept of a private placement). Trading such tokens likely requires using authorized investment firms or regulated markets (traditional exchanges), or multilateral trading facilities (regulated alternative trading platforms)
• Crypto-Assets (under MiCA): If an RWA token is not a MiFID financial instrument, it may nevertheless be regulated under MiCA. MiCA covers essentially three categories of tokens: (i) asset-referenced tokens (“ARTs“), (ii) e-money tokens (“EMTs“), and (iii) other crypto-assets (“Other CAs“). An RWA token that is backed by or references real-world assets like commodities, real estate, or art will typically be classified as an ART under MiCA. MiCA defines ARTs as tokens that maintain a stable value by referencing multiple assets, one or more official currencies, or other values. The rule is primarily aimed at stablecoins, but a token referencing a gold bar or a portfolio of artworks would also likely fall within this definition.  If a token is designed to track the value of a single fiat currency, it may qualify as an EMT. This classification is less common for RWA projects, which more often reference baskets of assets or individual non-currency assets. Other CAs that do not qualify as ARTs or EMTs, including utility tokens that grant access to a service or product, fall into a third category. However, tokens that claim to provide “access” to an asset can be problematic: if that access carries investment-like features, regulators may recharacterize the token accordingly. Under MiCA, issuers of ARTs have to publish detailed white papers, register with regulators, meet governance and prudential requirements, and, in some cases, seek authorization, especially if the token becomes significant in scale. MiCA imposes capital and reserve requirements on ART issuers to ensure they can honor redemptions or claims. Important: Even under MiCA, if an RWA token is framed purely as an investment with profit expectations, authorities may still categorize it as a security. The line can be fine. For example, a token referencing the value of a single luxury car might be an ART, but if it promises profit from rental fees or resale of that car, it starts to look like a security.

EU Pilot Regime for Market Infrastructures

‍Recognizing that existing trading rules were not designed for blockchain, the EU launched a DLT Pilot Regime in 2023. This is essentially a sandbox that allows approved market operators to experiment with DLT-based trading and settlement of securities, under some regulatory waivers. For example, it introduced new temporary licenses for DLT Multilateral Trading Facilities (“DLT MTF“) and DLT Settlement Systems. These allow trading of tokenized securities with certain relaxations, like higher limits on instrument quantity, exemptions from some pieces of CSDR and MiFID II. Only regulated financial firms, such as banks, exchanges, central securities depositories, can obtain these licenses. The DLT Pilot Regime is relevant if your RWA project plans to create a secondary market or exchange in the EU for security tokens – you’d likely partner with a firm that has, or can get a DLT MTF license. The DLT Pilot Regime is time-limited and is intended to inform future permanent adjustments to EU law to accommodate DLT. For most RWA startups, the DLT Pilot Regime is not something you’d directly engage with unless you are building an exchange.

Reverse Solicitation (Serving EU Investors from Offshore)

‍One common question is: If I am based outside the EU, can I let EU investors buy my tokens without triggering EU rules? The EU does have a concept of “reverse solicitation.” Namely, if an EU-based client on their own initiative seeks out a service from a non-EU firm, the activity can be outside the EU regulatory scope. MiCA explicitly includes a reverse solicitation exemption in Article 61 (mirroring MiFID II’s Article 42). In theory, this means that a non-EU RWA issuer could lawfully have EU investors if and only if those investors approached the issuer without any solicitation or advertising. In practice, this is a very narrow path. The firm cannot market or promote its token offering in the EU, including no targeted online ads, no outreach, and not even a website in an EU language. Even then, the burden is on the firm to prove the client truly acted at their own exclusive initiative.

Bottom line for the EU

‍The European framework is becoming clearer with MiCA, but it still boils down to the same core principle – is your token effectively a financial instrument (security)? If yes, expect full securities-law compliance. If no, you get the somewhat more tailored MiCA regime, but even that is far from lenient, especially for ARTs, which face banking-like oversight. The EU has also emphasized investor protection and market integrity, so disclosure and accountability are key. For example, MiCA will require white papers that include detailed information about the project, rights, risks, and even the technology. Also note, individual EU member states will enforce these rules – so while EU law is harmonized, you may still deal with local regulators in key markets like Germany, France, etc., each with their own enforcement culture.

5. Structuring RWA funds: U.S. vs. Offshore

Considering the heavy regulatory burdens, RWA entrepreneurs often ask: Where (and how) should we set up our project to minimize legal friction? The choice depends on your target investors, asset type, and risk appetite. However, three broad structuring models have emerged in practice.

Option 1: U.S.-Based Fund Structure (Delaware “Series LLC” or LP) – “Gold Standard.”

If you intend to target U.S. investors or institutional capital, the right approach is to set up a U.S.-domiciled investment fund entity, typically in Delaware. A popular vehicle is the Series LLC, which allows a parent LLC to create segregated “series” (compartments), each holding a different asset or asset pool. For example, Series 1 might hold an apartment building, Series 2 some gold bullion, Series 3 a loan portfolio. Each series is financially independent, which is ideal for tokenizing multiple assets without cross-liability. The Series LLC, or a Delaware limited partnership with an LLC general partner, operates within well-known U.S. investment laws, giving investors confidence and clear legal remedies. By using the private fund exemptions discussed above and selling tokens only to accredited investors or qualified purchasers, the structure can avoid the Investment Company Act registration. You will also appoint a management entity (an investment manager/management company) to run the assets. Depending on size, this entity might need to file as an exempt reporting adviser with the SEC.

Option 2: Offshore Fund Structure (Cayman Segregated Portfolio Company) – “Semi-Compliant Middle Ground.”

For some, the U.S. setup is undesired, especially if the initial target market is mostly outside the U.S. A common compromise is to establish the investment vehicle in a reputable offshore jurisdiction such as the Cayman Islands. Cayman’s law allows a structure analogous to a Series LLC: the Segregated Portfolio Company (“SPC“), which can create segregated portfolios under one corporate umbrella. Each portfolio can correspond to a different asset or project, similar to series. Cayman SPCs are widely used in the hedge fund and alternative investment world and are well-understood by institutional investors. The advantage is that Cayman is business-friendly, with no direct taxation, and a regulatory regime that is used to investment funds.

However, using a Cayman fund does not immunize you from U.S./EU law if you take U.S. or EU investors. Securities sold to U.S. persons still must use Reg D/Reg S, etc. In fact, tokens sold from a Cayman SPC to U.S. investors do not automatically qualify for the Reg D safe harbor for private funds. The aforementioned 3(c)(1) and 3(c)(7) exemptions don’t apply by default to foreign funds, so the offering must still be structured to comply, usually by treating it as a Reg D offering in the U.S. through a placement agent. Likewise, offering to EU investors may trigger Alternative Investment Fund Managers Directive requirements or local securities laws. So, Cayman is best suited if you plan to exclude U.S. retail and broadly market to non-U.S. investors, particularly “qualified” or institutional investors. Many projects will geo-block U.S.-based purchasers and include representations in the token purchase agreement that the buyer is not a U.S. person or is an accredited investor to be safe. Also note that if the asset management is happening from, say, the U.S. (the team is in New York managing a Cayman fund), the U.S. adviser may still need to register as an investment adviser unless exempt. Remember, offshore ≠ off-the-hook. If you target major markets, their regulators can still reach you, since Cayman’s fund secrecy is not absolute, and they cooperate with international authorities. Use offshore structures as a tool for flexibility, not as a way to hide from law enforcement.

Option 3: Pure Offshore Operating Company – “Gray Zone / Quick Launch.”

The simplest route, chosen by some early-stage projects, is to skip any formal fund structure and just incorporate a regular offshore company, such as a Panama corporation, a Seychelles IBC, to issue tokens. The appeal is obvious. These jurisdictions offer low cost, fast setup, minimal required disclosures or ongoing filings in those jurisdictions. The company can hold the asset and sell tokens representing it, all without explicit regulatory approval. This model might be tolerable for a small-scale MVP tor a private pilot with friendly users. It allows the project to test its hypothesis and gauge interest before committing to an expensive legal structure. However, the risks are enormous if the project actually takes off. An “unregulated” offshore company offers no shield against U.S. or EU regulators if you sell to their residents. The SEC, for instance, has chased projects domiciled in the Cayman Islands, the Bahamas, etc., when U.S. investors were involved. An offshore entity with no proper licenses may be violating securities laws the moment it sells tokens to a U.S. person or broadly advertises in Europe. Moreover, some investors, including traditional VC funds, may avoid opaque setups. They will perform due diligence and likely insist that the project migrates to a proper jurisdiction if they are to invest. Running a large tokenization platform with no fund registration might also spook potential partners (banks might refuse to open accounts, and reputable custodians or auditors may decline the relationship). In addition, without clear legal terms, token holders may have uncertain rights. If something goes wrong, the fact that it’s all in an offshore black box could lead to protracted legal battles, and investors may accuse the project of operating illegally.

Comparative Summary

‍Choice of legal structure affects everything: compliance costs, speed to market, investor trust, access to banking, and regulatory risk. The table below summarizes the trade-offs:

6. Asset-Specific Tokenization

Not all assets are tokenized the same way. Legal intricacies vary greatly by asset class. Let’s examine how tokenization works for different types of assets and what special issues arise in each case.

Real Estate

Real estate was one of the first and most popular asset classes for tokenization. A piece of property can generate steady rental income and appreciate over time, which are attractive features to investors. However, real estate also involves high purchase costs and low liquidity. Tokenization aims to solve that by allowing fractional investment in properties. Most real estate token projects follow a simple model: an SPV company is formed to own a specific property, then tokens are issued representing shares or profit rights in that SPV. Investors holding the tokens effectively have a stake in the property’s income, such as rent, or eventual sale proceeds.

Legal considerations: Real estate is heavily regulated at the local level. A fundamental challenge is that land ownership is recorded in government registries, not on blockchains. Transferring a token does not legally transfer the title of the property. Thus, the token must be structured as a contractual claim, such as representing a membership interest in the SPV that owns the property, or a right to a share of the SPV’s distributions. Selling the property (the underlying asset) still requires the usual legal process, such as deed, notary, registration with the land registry. Because of this disconnect, token holders are typically not registered as owners of the real estate; they are owners of the SPV or the fund owning the SPV, which in turn owns the real estate. This means token holders need to trust that the fund/SPV manager will act in their interest, which is why good legal agreements and possibly independent directors or trustees are important.

Another big issue is foreign ownership restrictions. Many countries restrict or prohibit foreign individuals or entities from owning land, especially land with certain uses, such as  residential or agricultural. Examples: In Thailand, foreign entities cannot directly own land; at best they can own up to 49% of a local company that owns land. The Philippines constitution bars foreign ownership of land; foreigners can own condos under certain conditions but not land. Indonesia doesn’t allow foreigners to hold freehold title; they can only get leasehold or usage rights for a term. These rules force tokenization projects to adapt. For example, they might set up a local holding company, restrict foreign token holders, or tokenize only certain rights like a long-term lease instead of full ownership. The bottom line is, to launch a real estate token in a given country, you must understand its property laws. In some cases, tokenization might not be feasible without running afoul of local law, or the project might unintentionally trigger illegal nominee arrangements.

Real estate also intersects with securities law, since a model where investors passively fund a property and share rents fits the definition of a security and collective investment scheme in many jurisdictions.

Commodities (Gold & Others)

Commodities like precious metals (gold, silver), energy (oil, gas), agricultural products (grain, coffee), and newer categories such as carbon credits have all seen tokenization attempts. Tokenization is relatively straightforward for fungible, divisible commodities, including gold or grain, that already sit in centralized facilities, such as vaults, warehouses. By contrast, non-fungible or registry-based assets, such as diamonds or carbon credits, require different models because individual items/credits aren’t interchangeable.

A common structure is that the physical commodity is deposited with a certified warehouse or depository, which issues a warehouse receipt or storage certificate. That document, evidence of the holder’s claim, is then held by a custodian or an SPV. Tokens are issued to represent either (a) specific, identified units of the commodity (for example, one token tied to a numbered gold bar or a particular diamond), akin to NFTs; or (b) fungible shares of a bulk holding (for example, 1 token = 1 gram out of a 100-kg pool). The latter is more common for divisible commodities.

Legal considerations: A blockchain record alone does not confer legal title. Token holders need enforceable rights under contract or property law to the underlying commodity; otherwise, the token risks being an unsecured promise of the issuer, especially problematic in an insolvency. Two pillars are proper custody (segregated, insured, audited storage) and clear redemption rights. Regulators assess whether tokens are actually redeemable for the physical asset and whether custody is robust. Where redemption is absent, authorities often view the instrument less like a warehouse receipt and more like an investment product or derivative, including a gold-exposure note/ETF or, if price is guaranteed, a swap. Successful designs such as Paxos Gold ($PAXG) and Tether Gold ($XAUT) maintain licensed custody and offer redemption, typically with fees/minimums.

Location is also important for tax and customs, since many projects use bonded warehouses or freeports in places like Switzerland, Singapore, or Delaware to delay VAT or duties until withdrawal. It also matters for property law and enforceability, as the governing legal system determines ownership rights and the validity of warehouse receipts. Storage providers should carry appropriate insurance and submit to independent audits; reputable issuers publish attestations so holders can verify existence and that assets are unencumbered.

Many commodity tokens are structured to resemble warehouse receipts or prepaid commodity contracts, not securities. If value derives from the commodity itself, and not the promoter’s efforts, securities risk is reduced. Pitfalls arise when issuers pool assets, add leverage, or promise yield/profit-sharing, features that can tip the analysis toward a security.

If commodity tokens start being used like money, then payments, e-money, or money transmission rules may apply to both issuers and trading venues, even if the tokens are not legally classified as “currency.” For example, gold tokens such as PAXG, which represent gold and tend to have relatively low volatility, may function similarly to stablecoins. The safest path is to keep the design as full-reserve, redeemable digital warehouse receipts, with conservative features (no leverage, no yield, no pooled trading strategies) and strong custody/redemption mechanics.

IP

Tokenizing IP means converting rights in intangible creations such as patents, copyrights (music, books, art copyrights), trademarks, even software or algorithms, into tokens that investors can buy. The usual goal is to raise funds for creators or IP owners by letting investors partake in future revenue like royalties. A common model is that IP owner (say a musician with a catalog, or a biotech startup with patents) transfers certain rights, or licensing rights to an SPV or a Royalty Trust. That entity then issues tokens that do not grant any ownership or rights in the underlying IP, but instead entitle holders to a share of the income generated from its use, such as royalties or licensing fees. In effect, the tokens represent contractual rights to receive revenue, not rights in the IP itself.

Legal considerations: IP tokenization is tricky because IP law is complex and often jurisdiction-specific. Some key points:

• Transferring IP vs. Licensing: In many countries, certain IP rights are non-transferable, especially copyright in civil law countries, where you can license it out, but the original author retains it. Moral rights, such as an author’s right to attribution and integrity of their work, are usually inalienable. So a token project can’t really “fractionalize ownership” of copyright in a song if the law says the songwriter can’t transfer portions of it. Instead, these projects focus on economic rights. For instance, the artist or inventor grants an exclusive license to the SPV for specific uses or for collecting royalties. The SPV then passes through the revenue to token holders. It’s crucial that all relevant rights holders, which might include authors, inventors, publishers, record labels, consent and contractually cooperate. Otherwise, a token purchaser might find the IP they thought they had a share in is encumbered or disputed.
• Enforcement and Registration: Many IP rights, including patents, trademarks, certain exclusive licenses, must be registered with government authorities to be effective. A patent, for example, is only valid if issued by the patent office, and any assignment of the patent should be recorded. So the SPV should ideally be the registered owner or registered licensee of the IP. Blockchain token ownership does not replace IP registration. The blockchain can track who bought tokens, but if someone infringes the patent, the enforcement will happen by the entity on record, such as SPV, in court, not by individual token holders. Tokens are more akin to contractual rights to IP revenues, not direct IP rights themselves.
• Securities Law: Most IP tokens will be securities because investors are passive and profits depend on exploitation of the IP by the creators or managers. The SEC has already viewed things like “music royalty shares” as securities in some cases. For example, when David Bowie issued “Bowie bonds” in the 1990s, they were securities – a precursor to modern tokenization. Unless a token is structured purely as a fan collectible with no expectation of profit, assume it’s a security and comply accordingly.

Despite these challenges, IP tokenization is promising. It can democratize funding for creators and let fans/investors support projects in exchange for a share of success. Just remember the famous saying: “an idea is not a patent, a song is not a royalty check.” The legal machinery to turn creative output into cash must be in place, or tokens are worthless.

A practical example of this model in action is Rihanna's sale of 300 NFTs, granting holders a right to a share of streaming royalties from her hit song "Bitch Better Have My Money". This case perfectly illustrates the contractual workaround to the legal hurdles of direct IP ownership transfer. The NFTs do not represent fractional ownership of the copyright itself. Instead, the sale was governed by a Swedish NFT Ownership Agreement. Under this agreement, each NFT entitles the holder to 0.0033% of the specific streaming royalties. Crucially, this structure focuses solely on the economic rights (revenue share), avoiding the impossibility of transferring copyrights and moral rights, while the tokens themselves likely function as securities.

A successful case also was Particle’s DAO that bought a Banksy painting and issued NFTs giving community members governance over the artwork’s “experience.” Though note, the NFT holders don’t legally own the art, they just participate in a DAO related to it. Contrast that with Masterworks, which creates an SEC-registered LLC for each artwork and sells shares (now sometimes tokens) that are legal equity in that LLC (which owns the painting), giving a legally enforceable ownership claim. That difference, legally recognized rights vs. purely contractual or conceptual ones, is what separates a mere “marketing concept” from an asset-backed token.

Equities and Debt Instruments

This refers to tokenizing traditional financial instruments, such as company stocks (equity), bonds, notes, or other debt and structured products. Essentially, “security tokens” in the classic sense. The idea is to use blockchain as a new system for issuing, trading, and settling these instruments, potentially bringing liquidity to private equities or allowing 24/7 trading of public equities in token form. For example, a company could issue shares in form of tokens instead of paper certificates, or a platform like Securitize or Backed Finance could issue tokens that mirror the performance of Apple or Tesla stock.

Legal considerations: Unsurprisingly, these are fully within securities law from the start. A token representing a share of stock is a share of stock, just recorded on a different ledger. So all laws around issuing and trading shares apply, including prospectus or exemption for issuance, transfer restrictions. One challenge is that corporate law in most jurisdictions doesn’t yet recognize a blockchain entry as updating the shareholder register. However, some jurisdictions, such as Delaware and Wyoming, have begun allowing corporate records to be maintained on distributed ledger technology. Interim solutions include using a traditional transfer agent who also updates a parallel blockchain, or having the token be not the share itself but a derivative (like a note) that gives economic exposure to a share.

Two models exist:

1. Native tokenized securities: A regulated entity, such as a broker-dealer or an issuing company with a transfer agent, directly issues tokens that represent securities and maintains the official shareholder or bondholder register on-chain. This approach is viable in certain jurisdictions or regulatory sandboxes and usually requires smart contracts that enforce transfer restrictions, allowing only whitelisted wallets of verified investors to hold the tokens in compliance with securities laws;
2. Synthetic/Wrapper tokens: An intermediary, such as a Swiss firm like Backed Finance or a trading platform, acquires real-world securities such as stocks or ETFs and then issues tokens that are contractually tied to the performance of those assets. These tokens are typically structured as debt instruments or depositary receipts. For instance, Backed’s bTokens, including $bAAPL, function as tracker certificates under Swiss law: the issuer holds the underlying stock, while token holders receive a debt claim whose value and payouts mirror that stock. This arrangement eliminates the need to alter Apple’s share register but legally positions token holders as creditors of the issuer rather than shareholders of Apple.

Both approaches have seen action. For example, the Republic platform created an offering called “Mirror Tokens” where each token was a contingent note paying out if a pre-IPO company had a liquidity event. They did this under Reg CF in the U.S., which permitted them to raise up to $5 million from both accredited and non-accredited retail investors, subject to individual investment limits based on investor income and net worth. Those tokens gave no equity, only a right to a portion of proceeds if the company IPOs or is acquired.

Traditional equities have established settlement systems (like DTCC). Tokenized versions introduce questions: How to handle dividends, voting, splits, mergers? Many of these actions currently still happen off-chain. For example, a token might automatically pay a dividend via smart contract if programmed, but often the issuer or an agent has to collect the actual dividend from the underlying asset and then distribute it on-chain. Voting can be done via snapshot or on-chain governance, but for it to count legally, the votes might need to be mirrored into the corporate resolution off-chain. Overall, there’s a lot of plumbing needed to fully integrate tokenized securities into corporate law compliance. The DLT Pilot Regime (discussed earlier) is one attempt to allow trading venues to handle these issues in a sandbox.

If you tokenize an equity or bond, you are squarely under securities regulations in every major jurisdiction. This means that only licensed intermediaries are permitted to facilitate trading, unless it is conducted privately on a peer-to-peer basis, and market abuse rules, including insider trading, apply in the same way as on a stock exchange. One advantage is clarity: once classified as a security, it remains a security, so the applicable ruleset is unambiguous. You know which ruleset to follow. Projects in this space often partner with existing stock exchanges or operate as Alternative Trading Systems (”ATS”) in the U.S., or MTFs under MiFID in Europe, to list and trade security tokens.

Tokenizing equities is particularly valuable in private markets, where it can provide liquidity to typically illiquid shares such as those in startups or real estate trusts, and in enabling global access, for example by allowing non-U.S. investors to trade U.S. stocks around the clock through tokens. Some of this activity already occurs in regulatory gray areas on overseas exchanges like Bybit as of 2025. For debt instruments, tokenization can simplify issuance and reduce costs by replacing paper notes with tokens. Even DeFi projects such as Ethereum’s MakerDAO have invested in tokenized bonds through regulated trusts, illustrating the crossover between decentralized finance and traditional finance.

The main legal takeaway is: token or not, a security is a security. The token is just a form. Compliance, disclosure, and investor protections must remain equivalent to traditional standards.

Art and Collectibles

High-value collectibles, such as fine art, luxury watches, rare wine, classic cars, have become a playground for tokenization. These assets are unique and often don’t generate income, but can appreciate and confer bragging rights or enjoyment. Tokenization here is usually about fractional ownership or economic interest in the item. For art, a common approach is to put a painting in an SPV and sell tokens that represent shares of that SPV, effectively splitting ownership of the artwork. The abovementioned Masterworks, for example, uses this model by offering shares in paintings under Reg A). For collectibles like wine or cars, tokens might represent a vault receipt or a claim to the item held by a custodian, with the possibility to redeem. However, in practice, many investors won’t redeem, as they’ll instead trade the token as a proxy for the asset’s value.

Legal considerations: The first question is title and possession. Physical possession of a unique item usually equates to effective control. So the asset must be held by a trusted party, such as custodian, museum, vault, who agrees to release it under certain conditions; like if someone owns 100% of tokens and requests physical delivery. Until full decentralization of physical handling is possible (which it isn’t), token holders rely on contracts ensuring the custodian will not sell, lose, or encumber the asset and that they will deliver it if conditions are met.

There’s also the issue that many collectibles need specific care. For example, wine needs climate-controlled storage and may require an Alcohol & Tobacco Tax and Trade Bureau, or local equivalent, license to store if it’s in bond. A classic car needs insurance and maintenance. These create ongoing costs, which are typically covered either by issuing slightly more than 100% of the asset and selling the extra tokens over time to pay expenses, or by charging fees to token holders.

Art and collectible tokens are frequently pitched as investments. Therefore, they often are securities in the eyes of the law. If you’re pooling investor money to buy a painting, and the investors expect profit on resale while you handle the curation and sale, the arrangement qualifies as an investment contract. If multiple artworks are tokenized as a portfolio, it may also be treated as an investment company. Many art token offerings thus register or use exemptions. Some try to avoid securities law by giving token holders some utility or governance.  For instance, Particle sold NFTs linked to a Banksy painting that give holders the right to vote on whether the painting should remain unsold. The painting itself was placed in a foundation that will never sell it, while NFT holders participate in a DAO that collectively “owns” the experience of the artwork.Because those NFTs don’t give financial profit rights (the painting won’t be sold for profit), they argued it’s not a security. But that’s a very specific, and arguably niche, model.

For straightforward fractional ownership where the asset will eventually be resold for profit, one must treat it as a security or at least a regulated crowd investment. European regulators, for example, would see a token that gives rights to a share of resale proceeds of a Ferrari as either a security or a collective investment scheme interest.

Another wrinkle is valuation and liquidity. Unlike gold or stocks, art and collectibles don’t have continuous markets, making pricing subjective and vulnerable to manipulation. For example,an insider could buy a token to artificially inflate its value. Platforms should therefore provide appraisal information and disclaimers. In some jurisdictions, a platform that facilitates trading of such tokens may be treated as operating an exchange or trading facility requiring a license, even if the tokens are not classified as securities. In places like the UAE, fractional investments may be regulated regardless of their legal form.

To sum up, tokenizing collectibles is legally possible and has been done, but you must back the tokens with solid legal rights, manage and insure the asset diligently, and more likely than not, treat the offering as a securities offering with all that entails, unless you find a creative structure that clearly avoids profit expectations. Otherwise, you’re selling what could be viewed as unregistered investment contracts or at least running a crowdfunding investment, which requires compliance. Without legal structuring, a token in a collectible is just a “marketing layer over an SPV” and may have no enforceability – a trap for unwary issuers and investors alike.

Athlete and Talent Contracts

A novel frontier is tokenizing future income of individuals. For example, an athlete or artist sells tokens that entitle holders to a percentage of their future earnings, such as prize money, salary, endorsement income. This is akin to the concept of “personal IPOs” or income share agreements, but on blockchain. A well-known early attempt came in 2019, NFL player Spencer Dinwiddie tried to tokenize part of his contract, though he ultimately issued a bond-like instrument to accredited investors. The idea is that young talent can get upfront funding from fans/investors, and in return those investors get a cut of the talent’s future success.

Legal considerations: These arrangements combine elements of securities, contract law, and even labor law. Typically, it works by the talent forming an SPV, or trust and that entity signing a contract with the talent where the talent promises X% of future income to the SPV. The SPV then issues tokens that convey rights to that income stream.

From a securities perspective, it’s almost certainly an investment contract, since the investors have a passive stake dependent on the athlete’s performance (efforts of a third party), which is a classic Howey test satisfaction. So you’d have to either register or use an exemption.

Additionally, professional athletes usually are under league and team contracts that may restrict assignments of income or prohibit outside investment schemes in their contracts. For example, a footballer can’t just sell part of his future transfer fee to third parties without possibly breaching contract or league rules. There are also jurisdictional limits. Some countries might view a contract to pay a percentage of personal earnings as akin to indentured servitude if not carefully structured, though it is generally acceptable when treated as a standard debt obligation. Contracts would need to be carefully drafted to avoid conflicting with employment law or talent guild rules.

Another issue is moral hazard and incentives – if an athlete has tokenized part of their income, what if they later decide to retire early or do something that reduces their income? Investors carry that risk. Without legal covenants or oversight, investors have little recourse, as they generally cannot compel the individual to perform better, avoid injury, or otherwise secure the promised income. Thus, these tokens are extremely speculative and disclosures must make that clear.

In terms of regulatory classification, aside from being a security, it might also be seen as a form of crowdfunding or even a loan, with the athlete essentially borrowing against future income. In some places, consumer credit laws could theoretically apply, though usually those exempt business/investment transactions.

To date, very few regulators have specific rules here, but you could draw parallels to “song royalty tokens” or “movie financing tokens,” which similarly monetize an individual’s or project’s future revenue and have generally been treated as securities.

7. Checklist: Launching a Compliant RWA Project

Bringing an RWA token project from idea to reality requires coordinating tech, finance, and legal workstreams. Below is a step-by-step checklist for founders to plan a compliant launch, from inception through post-launch operations. This sequence will help ensure you address critical legal considerations at the right time:

1. Determine the Asset Type to Tokenize. What exactly will your tokens represent – real estate, gold, a portfolio of loans, fine art or IP rights? This decision drives everything that follows. Each asset class has unique legal requirements. Also consider the asset’s characteristics: will it generate income, such as rent or interest, or is it only for resale appreciation? Is it fungible or unique? Outline these fundamentals clearly.
2. Define Target Investor Markets. Decide where your investors will likely come from, whether the U.S., EU, Asia, or specific countries. Geography is key because including investors from strict jurisdictions, particularly the U.S. or EU, will significantly raise compliance requirements. If you plan to tap U.S. or European markets, prepare for heavy regulatory lifting. Targeting other regions, such as Asia or the Middle East, may offer more flexibility, though most countries still have their own crypto or crowdfunding rules. To simplify compliance, it is often advisable at the outset to focus on either U.S. investors only or non-U.S. investors only, rather than mixing both groups from day one.
3. Clarify the Value Proposition & Token Holder Rights. Ask yourself: what do token holders actually get? Is it an ownership share of an asset? A right to a portion of income? A right to redeem the asset? Or just a usage right, like to access or vote on something? Defining the token’s economic features is critical, as they determine its legal classification. For example, a token that provides a redemption right to a real asset may, in some cases, be treated more like a warehouse receipt and not a security, while a token that only entitles holders to share in profits without control will almost certainly be deemed a security. Clarify whether your project is designed to provide access to an asset or to generate financial returns, since this will drive whether the token is structured as a utility token, a security, a fund unit, or something else. It will also determine the level of disclosure required and the licenses that may be needed.
4. Engage Legal Counsel for a Regulatory Analysis. Once the fundamentals are clear, engage experienced legal counsel and obtain a formal legal opinion or memorandum on the RWA project’s regulatory status. This step is essential; given the complexity involved, early professional analysis can prevent costly mistakes. The opinion should address key questions: is the token likely to be classified as a security in the target jurisdictions? If so, which exemption or registration path applies? Are there licensing obligations for the platform, such as broker-dealer, ATS, or investment adviser registration? Are there asset-specific requirements, such as real estate licensing, commodity storage rules, or IP transfer regulations? What are the tax consequences for both the entity and investors? The legal memorandum will outline risks and provide strategies to mitigate them, forming the foundation for structuring the venture properly.
5. Choose the Legal Entity Structure. Based on legal advice, determine the appropriate entity structure for the RWA project. Consider using a framework that isolates each asset so that issues with one do not affect the others. For example, a Series LLC or separate SPVs for different assets. Decide which entity will serve as the token issuer: in many cases, the asset-holding SPV issues the tokens directly, while in others a parent company issues tokens that represent claims on a subsidiary’s asset. Ensure the structure aligns with regulatory requirements. For instance, in a U.S. Reg D offering, the issuer must be the entity filing Form D, and it should be organized as a corporation or LLC, not as a DAO or similar arrangement.
6. Set Up Entities and Prepare Documentation. Once the structure is in place, incorporate the entities and begin preparing the necessary legal documentation. This typically includes formation documents such as the Certificate of Incorporation and Operating Agreements with provisions tailored for token holders, as well as offering documents like a Private Placement Memorandum or a Prospectus/Whitepaper describing the offering and associated risks. You will also need Token Purchase or Subscription Agreements setting out the terms for investors, along with agreements with service providers, including custody arrangements for assets, trustee or escrow agreements, and management agreements if an investment manager is involved. If licenses are required, those processes should be initiated at this stage. In addition, it may be advisable to engage auditors to verify the existence or periodic valuation of the underlying assets.
7. Acquire the Asset and Secure Custody. Before or alongside fundraising, the underlying asset must be secured and placed in proper custody or storage. For real estate, the SPV should either complete the property purchase (funded by seed capital or bridging finance) or have a binding agreement to acquire it once token proceeds are raised, with escrow arrangements if necessary. For physical goods, the assets should be transferred to the designated custodian, with supporting documentation such as title or warehouse receipts. For IP, assignment or license agreements should transfer the relevant rights to the SPV or trust. Clear title is essential, free of liens or encumbrances unknown to token holders, and appropriate insurance should be in place, whether for properties or vault contents. If a third-party custodian is used, it should ideally acknowledge the token holders’ interests or, at minimum, the SPV’s obligations to them. By the time tokens are issued, the asset must already be securely under the project’s legal structure, as token buyers will be relying on that fact.
8. Issue the Tokens. Once the legal groundwork is complete, you can proceed to mint and distribute the tokens. This step should only occur after all prior measures are in place, as the moment tokens are issued the project becomes “live” and any compliance gaps turn into legal liabilities. Technically, issuance takes place through smart contracts, but the mechanics must reflect the legal commitments made. For example, if tokens are limited to accredited investors, the smart contract should enforce whitelisting, and if tokens are subject to a one-year lock-up, that restriction should be programmed in. At this stage, many projects conduct KYC/AML checks on all purchasers, often through a platform or third-party provider, to ensure compliance. Where a public sale is permitted, a prospectus or offering document may need regulatory approval. Following issuance, notice filings may also be required, such as Form D in the U.S. under Reg D or regulator notifications under MiCA. It is prudent to have legal counsel prepare a detailed “go-live“ checklist to ensure no final requirements are overlooked.
9. Post-Launch Operations & Compliance. After launch, the project enters the operational phase, where ongoing compliance and sound management are critical. This involves managing the underlying asset. For example, in the case of real estate, the property manager must remit rent to the SPV, which then distributes proceeds to token holders if that is the chosen model. It also includes maintaining licenses and exemptions, renewing them annually if required, and fulfilling any reporting obligations. Regular updates and financial reports should be provided to token holders, both to build trust and, in some cases, to meet legal requirements. Any redemption or buy-back features of the token must be honored, and secondary market trading should be monitored to ensure it remains within compliance. For instance, to avoid becoming too widely held if that would undermine an exemption. Regulatory developments must also be tracked, with flexibility to adapt if new laws affect the token. Internally, establish a compliance program: even if not strictly mandated, policies on AML, conflicts of interest, and handling of material non-public information help ensure the project remains credible and well-governed. Ultimately, sustainable projects are those that embed compliance into their ongoing governance, rather than treating it as a one-time hurdle.

Following this plan, while resource-intensive, can dramatically reduce legal risks and increase the credibility of your RWA platform. Cutting corners on any of these steps, especially skipping legal review or failing to secure the asset properly, can doom the RWA project either via regulatory enforcement or loss of investor trust. Tokenization of RWA is as much a legal engineering exercise as a technical one and success comes from excelling at both.

8. Conclusion and Key Takeaways

Tokenizing real-world assets in 2025 is not just a tech experiment, but a powerful tool that could transform capital markets and investment access. It’s turning traditionally illiquid assets into tradeable, fractional interests on a 24/7 global market. But with great power comes great responsibility: legal engineering is the cornerstone of any sustainable RWA project.

Blockchain technology can digitalize and democratize assets, but it does not eliminate the underlying legal realities of ownership, contracts, and investor rights. In fact, the success or failure of an RWA venture often boils down to whether its legal structure holds up under stress and whether courts and regulators will enforce the token’s promises. As we’ve seen, most jurisdictions still rely on traditional legal constructs to define what a token represents and what regulations apply.

Final advice is to seek qualified legal counsel whenever there is uncertainty. This guide has armed you with knowledge of what to consider, but success depends on precise execution. Our team at Buzko Krasnov stands ready to assist at any stage, from choosing the jurisdiction and entity incorporation to preparing legal opinions, handling token offering compliance, and crafting a regulatory strategy for your target markets. With careful planning and the right partners, you can turn real assets into tokens with real value, safely and successfully. Good luck on your tokenization journey!

We hope this guide will help navigate new legal challenges presented by the dynamic world of RWA tokenization. If you have any questions or ideas on how to improve this guide, please reach out to us at crypto@buzko.legal.