Digital assets are gaining steam after years of headwinds driven by uncertainty around their security and reliability. Firms and banks have worried in particular about a lack of clarity from rulemakers, hindering tokenization of real-world assets. Tokenization is a mechanism of representing ownership in a real property or security via a digital asset tracked on a blockchain. It can make traditionally hard-to-trade assets easier to transact, improving accessibility and adding transparency.
While these digital transactions have so far been limited to early adopters with higher risk tolerance, the dam may now be about to break. Mainstream tokenization has the potential to democratize investment opportunities and unlock new liquidity paths for many different assets.
New regulations and deeper integration with existing financial institutions are opening the door to widespread tokenization. Financial services, as well as real estate, art, and other luxury goods will be transformed by the entry of new capital and investor classes. To make the most of this coming wave, retail and institutional investors must understand what has changed and how tokenization will impact their operations and portfolios in the years ahead.
The Rules of the Road
Until recently, a lack of regulatory clarity stood as a primary barrier to mass tokenization — but the passage of the GENIUS Act in 2025 and the expected passage of the Clarity Act in 2026 are now changing the landscape.
The GENIUS Act established the first federal regulatory framework for stablecoins, tokens pegged to the U.S. dollar, to reduce the volatility typically associated with cryptocurrencies. Issuers must now back stablecoins with 100% reserves, substantiated by mandated monthly disclosures. The Clarity Act, which is moving through Congress and expected to come into effect in 2026, offers further guidance around how digital assets will be regulated. The act standardizes the definition of digital commodities based on their connection to the blockchain, as distinct from securities, derivatives, and stablecoins, and codifies registration requirements for brokers and dealers. The Securities and Exchange Commission (SEC) has also adopted a more collaborative posture, removing cryptocurrency from its special risk category heading into 2026.
Together, these shifts have provided much-needed “rules of the road” for digital assets, removing the uncertainty that was causing retail and institutional investors to fear they would be subject to unexpected compliance scrutiny. As markets prepare for a dealmaking revival in 2026, these changes arrive at a particularly opportune moment. Tokenization can introduce new buyer pools and ways of investing, setting the stage for expanded adoption.
How Tokenization is Reshaping Industries
Tokenizing assets is not just another means by which institutions can make, spend, and move money. It democratizes ownership for investors and interested parties across sectors. Thanks to tokenization, an individual who could not afford a $1 million price tag for a given asset can now buy a portion of it for a fraction of the cost. Unlike traditional stocks, tokens are also tradeable 24/7, offering greater financial flexibility and freedom. However, this may only be a temporary distinction, as tokenization may give rise to 24/7 trading for stock via the blockchain as well.
Some private equity (PE) fund managers are already using tokenization to facilitate cheaper deals. Blockchain technology allows for instant settlement of intercompany transactions, and tokenizing fund ownership opens access to investors who were previously shut out of these opportunities. Looking ahead, funds pursuing a fractionalized model will need to overhaul their investment theses and stakeholder communication strategies to make sure they clearly communicate the reasons for and benefits of the changes.
Tokenization also has significant implications for assets with secondary markets. For instance, many companies already sell and trade carbon credits, but the blockchain will offer new ways to liquidize them and provide even more traceability for each transaction. Jewelry companies and other luxury goods manufacturers can make non-fungible tokens (NFTs) part of the experience, introducing new opportunities for limited-run or exclusive-access merchandise as well as tracking ownership and capturing a piece of resale prices.
The art world is another area that has historically been inaccessible to all but high-net-worth (HNW) individuals and institutions. Tokenized art — or art that exists only as an NFT on the blockchain, with which some creators are already experimenting — means new venues for investors and artists alike. Artists and dealers will find it easier to sell work to a larger and more diverse audience, and the public will find it easier to participate in one of the oldest, most prestigious marketplaces available.
Real Estate Tokenization
The real estate market, in particular, will see substantial benefits from tokenization. Properties are typically among the most expensive assets, and investment consequently comes with a higher barrier to entry. Fractionalized ownership introduces new ways to fund construction projects and attract capital. Investors can own parts of multiple properties, potentially expanding their portfolios and gaining related earnings, such as rental income and tax benefits, without the typical management challenges or large upfront expenses.
Tokenization also makes it easier for international investors to participate in U.S. markets and will potentially give rise to new ways for individual homeowners to put their equity to work without selling. U.S. real estate and construction firms, largely due to slower moving regulations, are currently behind their international peers in adoption, but they are poised to catch up over the next few years.
To learn more about tokenizing real estate, contact BDO’s Real Estate & Construction professionals.
Remaining Barriers and Limitations
While the road to widespread tokenization is clearing quickly, a few barriers remain. For instance, there are still many unanswered questions regarding how tokenized assets will be handled under tax law. The Internal Revenue Service (IRS) has yet to issue guidance around digital assets and tokenization, as well as how they will treat issues like de minimis rules, wash sale rules, staking and mining taxation, and backup withholding on airdrops. Fortunately, movement from the SEC and other regulatory bodies will likely prompt the IRS to formalize guidelines over the coming year. Progress is already being made in other areas, with banks now able to act as crypto intermediaries.
Beyond regulation, traditional financial institutions are still figuring out how to evolve their business models to participate in tokenization. Major banks will need to develop systems to custody digital assets and insurance companies will need to find ways to insure them. On an individual level, current accredited investor rules may limit participation. The original intent behind accredited investing was to protect retail investors from being taken advantage of or from making investments they did not fully understand. But under these standards, certain asset classes are functionally closed to all but HNW investors. These rules will likely evolve as tokenization takes hold and democratized ownership becomes the norm, with accreditation criteria no longer hinging so heavily on wealth alone.
User experience (UX) presents another hurdle to tokenization. Current UX design within the digital assets market is often unintuitive and confusing, presenting a de facto barrier for all but the most tech-literate early adopters with an above-average tolerance for friction. Design will likely improve over time as more users come onboard, and banks and fintechs alike face pressure to improve their app- and web-based interfaces for tokenized asset integration.
Additionally, while accredited investor rules are likely to change, some degree of protection will always be necessary because tokenization carries its own risks. Bad actors and scams are omnipresent in today’s digital asset market, and as tokenization goes mainstream there could be an uptick in phishing attempts to trick individuals into giving up their digital wallet keys. Smart contracts, while offering greater security and verifiability, are not infallible. They are vulnerable to sophisticated hackers or simple human error. While these risks may understandably give some investors pause in the short term, the new rules of the road give banks, funds, and brokers a framework to implement compliant and proactive solutions over time.
Catching the Tokenization Wave: How BDO Can Help
Tokenization can seem both exciting and intimidating. It represents a fresh way of doing business and accruing capital, but it also comes with novel risks and will require organizations to reimagine how they pursue asset liquidity. Leaders across industries may be interested in the benefits but feel unsure of how to prepare.
BDO can help organizations navigate this complexity, tracking emerging trends and their impacts on businesses across industries. Our professionals have deep digital assets experience, and can help address key knowledge gaps, from tax uncertainty and smart contract vulnerabilities to structuring tokenization offerings that are both complaint and align with your investment strategy. We monitor evolving regulations from SEC, IRS, and other regulators, so you can move confidently into a promising new market.
Ready to take your first steps into the digital assets market? Contact us to get started.