Real-World Assets are becoming a lasting part of onchain finance. At Plume, we aim to make this ecosystem accessible to everyone. The RWA Academy breaks down everything you need to know, from the most basic explanations to more detailed financial concepts. Here we discuss why securities make an ideal RWA.
Real-World Assets (RWAs) often immediately bring to mind extremely tangible examples, like real estate. The market has since evolved toward structurally compatible assets, primarily securities.
Funds and special purpose vehicles (SPVs) have emerged as the dominant form of RWAs because they align naturally with both financial regulation and blockchain infrastructure.
Securities As An Ideal RWA
As a refresher, securities are tradable financial assets or instruments that represent value. The most common categories include equity (stocks), debt (bonds), and rights-based instruments (options).
These kinds of assets are well-suited for tokenization for a few reasons:
- Enforceable Ownership: They possess legally enforceable structures that are independent of physical ownership.
- Programmable Lifecycle: Their structures already make them easily transferable to smart contract logic.
- Standardized Valuation: Expressed in share-based Net Asset Value (NAV) terms that translate cleanly to token pricing.
- Regulatory Standards: They already have regulatory standards that can be integrated onchain.
Enforceable Ownership Beyond Physical Possession
A core challenge in RWA tokenization is true possession. When it comes to a physical entity, it’s hard to enforce physical ownership simply through a token. Should the physical item be stolen or transferred outside token control, the token representing it doesn’t automatically acknowledge this.
Securities operate differently. A share represents a claim that is recognized and enforceable in the real world through frameworks like registries, custodial accounts, and legal documentation. This, in turn, means the digital representation onchain reflects this ownership rather than establishing new claims.
Transferable Structures Adaptable to Onchain Logic
A lot of financial mechanisms onchain were built to reflect longstanding financial processes in the real world. Onchain the process of issuing new tokens (minting) and redeeming them back to the issuer (burning) are smart contract-based equivalents of subscribing and redeeming new shares.
While other RWAs require more operationally complex functions to represent and manage onchain, securities offer much easier mapping into smart contract structures.
Standardised Pricing That Reflects Token Representation
Another structural alignment is pricing. Crypto markets typically express value in USD-denominated terms regardless of token mechanics. Similarly, securities are priced per share through Net Asset Value (NAV), calculated and updated on a defined schedule.
So securities that are priced this way and are updated regularly can be easily reflected onchain at the same value calculated offchain. Representing their ‘real-world’ value without introducing new mechanics or having to adapt them at all.
Regulatory Standards Ready for Onchain Integration
Funds and SPVs are well understood and have had years of compliance and regulation frameworks for the traditional financial market. Unlike crypto-native tokens which can see wild variations in value influenced by a number of factors, securities operate under standardized valuation practices.
When it comes to regulation and compliance, securities bring long-established and regularly reconsidered regulatory frameworks. These rules, while still needing some adaptation and confirmation, are easier to transpose onchain into smart contracts.
However, recent insights from SEC leadership underscore the necessity for targeted updates to these regulations to better support onchain RWAs and blockchain innovation. Commissioners Paul S. Atkins and Hester M. Peirce have pointed out that current frameworks can impose undue barriers on tokenization, such as ambiguity around crypto asset classifications and custody for non-security assets like stablecoins. They advocate for modernization through initiatives like an "innovation exemption" to allow limited trading of tokenized securities on permissionless blockchains, and "Project Crypto" for harmonized rulemaking that embeds compliance directly into smart contracts, reduces costs, and enhances privacy with technologies like zero-knowledge proofs.
Regulatory modernization through efforts by the SEC and other regulators (such as the Bermuda Monetary Authority and Hong Kong’s Securities and Futures Commission) will ultimately enable more efficient integration of RWAs into onchain finance without sacrificing investor protections. Specific areas where such updates to securities regulations can facilitate the growth of onchain capital markets include:
- Modernizing rules relating to anti-money laundering (AML) and sanctions for tokenized assets with a centralized issuer such that issuers or their service providers can ensure compliance through onchain native compliance methods such as active transaction monitoring and embedding compliance logic, such as “freeze and seize” functionality. This approach has already been recognized for stablecoins under the US’ GENIUS Act and would also be appropriate for tokenized assets. AML and sanctions compliance can be done more effectively using this approach without the universal application of know-your-customer (KYC) requirements that hinder the reach of capital markets products to underserved domestic and international users and capital formation more broadly.
- Revising rules for custody to take account secure and fully transparent onchain self-custody mechanisms, including onchain asset management infrastructure like Nest, that limit or eliminate the policy rationale for third-party custodians.
- Establishing common-sense pathways for capital raising through the sale of tokenized assets, enabling more accessible and efficient funding mechanisms onchain.
- Modernizing transfer agent rules (or asset-liability management rules generally) to accommodate blockchain's role in recordkeeping, streamlining the management and transfer of tokenized securities.
- Providing additional rules, guidance, no-action letters, and exemptive orders for tokenized securities in DeFi contexts, fostering innovation while clarifying compliance for onchain markets.
Finally securities operate under established service provider systems including administrators, custodians and transfer agents. These functions (though not necessarily the intermediary itself) can be integrated into onchain infrastructure
A Practical Foundation for Onchain Finance
Compared to many other asset classes that face operational, legal, or structural hurdles when moving onchain, securities provide a far more practical starting point. Their established legal recognition, familiar lifecycle mechanics, and standardized valuation frameworks reduce friction for both issuers and investors.
Just as importantly, securities are already widely understood across global financial markets, making the transition to tokenized formats more intuitive for institutions and individuals alike. Rather than requiring participants to learn an entirely new financial model, tokenized securities extend familiar instruments onto more efficient and programmable infrastructure.
Securities are not simply one category of real-world assets onchain. They are increasingly becoming the foundational primitive upon which the broader RWA ecosystem can scale.
This material is for general informational and educational purposes only and does not constitute financial, investment, legal or tax advice.Tokenized assets involve risk and may not be suitable for all participants. Returns, performance and characteristics of traditional financial instruments may not translate identically to their tokenized counterparts. Always conduct your own research and consult qualified professionals before making decisions involving real-world assets or blockchain-based systems.