Tokenization of Real-World Assets: Separating Promise from Hype

Tokenization means representing ownership of an asset, such as a bond, a fund unit, real estate or a commodity, as a digital token on a shared ledger. Major asset managers and banks have launched tokenized funds and bonds, and the idea is spreading to emerging markets. In Nigeria, the Investments and Securities Act 2025 recognises digital assets as securities, which brings tokenized offerings under the Securities and Exchange Commission's oversight.

What tokenization can improve

• Settlement: transfers can settle in minutes instead of days.
• Fractional ownership: high-value assets can be divided into smaller units, widening access.
• Operations: ownership records, distributions and corporate actions can be automated.
• Transparency: a shared record reduces reconciliation between parties.

What it cannot fix

A token is only as good as the legal rights behind it and the asset it represents. Tokenizing a property does not resolve a title dispute. Tokenizing a commodity does not prove the commodity exists. Liquidity does not appear just because an asset is digital; buyers still have to want it.

Questions investors should ask

• What legal claim does the token give me, and in which jurisdiction is it enforceable?
• Who holds the underlying asset, and how is that verified?
• Is the offering registered or exempt, and with which regulator?
• How can I sell, and to whom?

How a tokenized asset is structured

Most tokenized real-world assets follow a similar structure. A legal entity, often a special purpose vehicle, owns the underlying asset: a building, a bond, a fund or a commodity. Tokens represent shares in that entity or rights to its cash flows. A custodian holds the asset or its title documents, a transfer agent or smart contract records ownership, and regulators supervise the offering as they would any security. The token is only as strong as the legal chain connecting it to the real asset.

Where tokenization is gaining traction

• Government bonds and money market funds: large asset managers have launched tokenized funds that settle quickly and can be used as collateral.
• Private credit: tokenization can broaden the investor base for loans to businesses.
• Real estate: fractional ownership can lower minimum investments, though liquidity remains limited.
• Commodities: tokens backed by stored gold or other commodities offer easier transfer.

Africa's opportunity

For African markets, tokenization could widen access to investment and help businesses raise capital from diaspora investors. Nigeria's Investments and Securities Act 2025 brought digital assets more clearly within the securities regulator's remit, giving a framework for compliant offerings. The opportunity is real, but only for projects that combine strong assets, clear legal structures and transparent reporting.

A leader's view: start with the problem, not the token

Executives are often approached with proposals to tokenize an asset, a fund or even a company. The first question should be: what problem does this solve? If the answer is faster settlement, broader investor access, lower administrative costs or better collateral mobility, tokenization may help. If the answer is that tokenization is fashionable or will make an illiquid asset suddenly liquid, caution is warranted.

Leaders evaluating a tokenization project should involve legal, tax, compliance, finance and technology teams from the start. Securities law will usually apply. Custody arrangements must be clear. Accounting treatment for the tokens and the underlying assets must be settled. Investor protections, disclosures and ongoing reporting must meet regulatory standards. Technology choices, such as which blockchain and which smart contract design, carry security and operational risks that must be managed.

Pilot projects with limited scope, such as tokenizing a portion of a fund for institutional investors, help organisations learn without excessive risk. From my perspective as a forensic accountant and fintech practitioner, the most important safeguard is simple: the legal and accounting records must always match the blockchain records, and an independent party must verify that the assets exist. Without that, tokenization adds complexity without adding trust.

A forensic accountant's view

New structures attract both innovation and fraud. Every tokenized product should face the same diligence as a traditional security: audited reserves or assets, clear governance and independent verification. Where those exist, tokenization can make markets more efficient. Where they do not, it can make losses faster.

Common questions

What is tokenization of real-world assets?

Creating digital tokens on a blockchain that represent ownership or rights in real assets such as bonds, funds, property or commodities.

Is tokenized property a good investment?

It depends on the underlying asset, legal structure, custody, fees and how easily tokens can be sold. Tokenization does not make a weak asset strong.