Tokenized Real-World Assets: Infrastructure, Mechanics, and Compliance

The current inflection point

We’re in the midst of a rapid acceleration in the movement of real economic value onto programmable settlement infrastructure. 

Stablecoins proved that value could move globally with near-instant finality, auditability, and interoperability. Now, attention has turned to the assets that power the financial system: US Treasuries, credit portfolios, deposits, real estate, commodities, funds, trade finance receivables, and structured products.

This shift isn’t driven by speculation — it’s driven by operational reality. Programmable ledgers enable assets to be transferred, cleared, pledged, and monitored more efficiently than in legacy systems. The opportunity is not about reinventing finance, but modernizing its underlying recordkeeping and settlement infrastructure.

How tokenization works: The ownership layer, not the asset

Tokenization doesn’t alter the underlying asset. It changes how ownership is recorded and transferred. A real-world asset — like a Treasury bill, money market instrument, or income-producing credit — is first held by a custodian or registered in an off-chain system. Then, a legal wrapper — typically a trust or special purpose vehicle — is established to create a clear, compliant link between the off-chain asset and its digital representation.

A smart contract can be used to enhance programmability, often using well-established token standards that allow for transfer controls, auditability, and interoperability. Smart contracts can issue the digital representation of claims on the underlying asset or on the entity holding the asset to investors, limited partners, or users. Economic rights such as interest payments, principal repayments, and redemptions can be synchronized with custodians or administrators, improving lifecycle efficiency.

Tokenization makes ownership portable, verifiable, and machine-readable — collapsing settlement into the simple act of updating a shared ledger versus reconciliation across multiple disparate books and intermediaries.

Deposit tokens and stablecoins: The transaction and liquidity layer

Once ownership is programmable and on-chain, the next question is how users move into and out of these markets. Deposit tokens, issued by commercial banks and backed one-for-one by deposits, offer a regulated path for value transfer across programmable rails.

Stablecoins — typically backed by reserves or short-duration instruments — serve as a more efficient transaction layer than moving funds back and forth between fiat and digital assets.

In practice, these systems work together: an investor may subscribe to a tokenized credit fund using a stablecoin, receive fractional entitlements on-chain, and redeem into a deposit token. While the user experience becomes more fluid, the underlying safeguards must remain rigorous.

Why on-chain settlement improves transparency and control

Every transaction on a public or permissioned blockchain is time-stamped, cryptographically signed, and permanently recorded — creating a full audit trail across the asset’s lifecycle.

Unlike traditional systems that obscure provenance across multiple intermediaries and reconciliation cycles, on-chain settlement makes the full history of movements observable. While risk doesn’t disappear, it becomes transparent and traceable.

Compliance considerations: Identity, monitoring, and behavioral intelligence

Transparency alone doesn’t constitute compliance. As institutions build controls for tokenized assets, many existing money laundering typologies remain relevant, like wash trading, preferential liquidity routing, investor fraud, misappropriation, and placement of illicit funds.

To establish trust with regulators and the market, compliance teams should consider five areas to enhance their controls.

1. Identity and wallet attribution

Map investor wallets to verified legal entities or individuals, and maintain a live database linking on-chain addresses to onboarding records and beneficial owners. Provenance must remain identifiable throughout the asset’s lifecycle. Block transfers from unregistered or reassigned wallets.

Where unhosted or private wallets are involved, combine blockchain intelligence — including insights into counterparties, transaction history, wallet age, and virtual asset service providers (VASPs) used — with Know Your Customer (KYC) information to uncover behavioral signals.

2. Entry-point screening

Before issuing tokens or facilitating subscriptions and redemptions, it’s critical to screen investors, wallets, and entities for sanctions exposure, Politically Exposed Persons (PEPs), source of funds, and jurisdictional risk. These processes closely mirror traditional anti-money laundering (AML) workflows at asset managers and fund administrators, but tap into a new data set that can surface unique risks.

3. Continuous behavioral monitoring

Static screening isn’t enough. Compliance teams should build on-chain behavioral analytics into their transaction monitoring systems to detect patterns such as circular funding, self-dealing, or coordinated activity among related wallets. Supplement traditional behavioral anomaly detection tools with blockchain intelligence to create a robust control environment.

4. Jurisdiction and asset controls

Embed eligibility logic directly into the settlement infrastructure. Define the investors and asset types that are permitted under each regulatory regime, and enforce using smart contract rules.

Programmability enables jurisdictional compliance at the protocol level.

5. Governance and auditability

Similar to traditional compliance controls, assign clear accountability and documentation for your real-world asset (RWA) compliance framework, including policies for wallet screening, monitoring thresholds and escalation paths. 

Together, these considerations create the foundation for a trusted compliance program that aligns with regulators’ expectations while leveraging the precision and auditability of on-chain data. This is how programmable finance becomes programmably compliant.

The institutions leading the way are building with trust

The movement of real-world assets on-chain isn’t speculative — it’s already a reality with institutional investors. The institutions that succeed will be those that embed trust into the system from day one: trust in custody, identity, monitoring, and transaction integrity.

TRM is working alongside leading global financial institutions, asset managers, custodians, and market operators to help ensure the emerging tokenized RWA ecosystem is secure, transparent, and compliant.

Want to learn more? Get in touch to talk to a TRM expert.