The tokenised asset market has grown to over $31 billion on-chain, excluding stablecoins, according to DWF Labs Research. US Treasuries and private credit have led the charge as asset managers digitise familiar products for blockchain distribution. The scale looks impressive until you examine what actually trades.
The problem is plain: growth in token supply has outpaced growth in usable liquidity. Fragmentation across chains and platforms means capital sits isolated in separate order books. A buyer seeking a tokenised Treasury on one chain may not find counterparties, or faces spreads wide enough to eliminate arbitrage. Makers lack incentive to post bids and offers when trading volume stays thin and settlement happens on unfamiliar rails.
Traditional finance solved this through market makers backed by regulatory certainty and clearing guarantees. On-chain equivalents haven't emerged at scale. Platforms compete on custody, yield, and brand rather than on narrow spreads. The institutions moving real assets into tokens expect institutional-grade liquidity, yet the market structure to provide it remains absent.
Regulatory clarity has helped drive issuance. Asset managers see permissive signals from the SEC and European regulators on tokenised securities, making the product feel safer to launch. But that same clarity hasn't yet triggered deep market-making. Wire transfers settle in hours. On-chain transfers settle in minutes, yet the trading infrastructure assumes a different pace altogether.
The liquidity gap also reflects a chicken-and-egg problem. Asset managers won't tokenise at scale without confident buyers. Buyers won't enter without tight execution. Market makers won't commit capital without volume guarantees. Until one side breaks the cycle, fragmentation persists.
For regulators watching the sector grow, the picture is mixed. More on-chain activity expands their jurisdiction and pushes tokens into settlement visibility. Thinner liquidity, however, means larger individual trades move prices more sharply and creates operational risk for institutions new to the format. The $31 billion figure signals adoption. The liquidity profile signals the market remains in formation.