Record-breaking RWA TVL of $10.67b fuels discussion on digital asset's intrinsic worth

A new record has been set for the total value locked (TVL) in real-world assets (RWAs), which now amounts to $10.68 billion. However, some traders are questioning the worth of RWAs on the blockchain.

Data from DeFi Llama shows that the total value locked from on-chain real-world asset protocols has reached $10.68 billion. A significant portion of the TVL, 15.44%, comes from BlackRock's tokenized fund, the BlackRock USD Institutional Digital Liquidity Fund or BUIDL.

The TVL surpassed the $10 billion threshold for the first time just a day before. The significant increase in on-chain value of RWAs indicates a growing interest in real-world asset tokenization. Investors have been attracted to tokenized RWAs, such as U.S. Treasuries and real estate, due to their stable yield options. These assets offer a relatively steady return in a volatile crypto market, drawing more capital into the ecosystem.

Several asset managers, including BlackRock, Fidelity, and Janus Henderson, have been drawn to the appeal of tokenization and invested in the sector. Ondo (ONDO) Finance recently entered the tokenization sector by launching a Layer 1 blockchain focused on RWAs in February.

Ondo Finance's RWA protocol has already climbed to fourth place in terms of TVL, despite launching just last month.

More countries have embraced the tokenization of real-world assets through sandbox projects and regulatory guidelines. Hong Kong's Secretary for Financial Services and the Treasury has already stated that the region will focus on tokenization and stablecoin.

The Dubai FSA has also launched a Tokenization Regulatory Sandbox program for crypto firms interested in RWA-focused products and services.

Debate over RWA value on the blockchain

The increase in real-world tokenization has sparked debates in the crypto community about whether the value of real-world assets can be fully represented on-chain.

Joe Carlasare, an attorney at SmithAmundsen and Bitcoin advocate, argued that real-world assets should not be counted on-chain. He believes that the blockchain only holds a digital record of the asset, essentially an IOU that only serves as claims to the value of an asset.

Therefore, it cannot fully represent the value on-chain.

"You can only put IOUs for RWAs that need to be enforced by courts," said Carlasare in his recent post.

Dave Weisberger, Co-Founder and former CEO of CoinRoutes, challenged Carlasare's viewpoint by stating that although the value of the physical asset itself cannot be transferred on-chain, the title to said asset could be.

"At a minimum, the provenance of that TITLE could be significantly easier to verify than paper titles, but it could go a lot further," said Weisberger, pointing out that tokenization can eliminate many problems related to ownership.

However, Carlasare disagrees, stating that the issue of titles can be solved without a blockchain. He still maintains that courts are necessary to verify the value of real-world assets because the TVL represented on-chain is essentially just a promise that still requires court enforcement to be fully realized.