Chung Hei Sing

Chung Hei Sing

I work at the intersection of institutional capital allocation, governance, and financial infrastructure, with a focus on real-world assets and long-term investment decision-making.

Why “Code Is Law” Fails for Real-World Assets

Governance Gaps in Tokenized Markets

Abstract

The proposition that “code is law” has been central to the development of blockchain-based markets, promising automated enforcement, reduced transaction costs, and trustless coordination. While this paradigm has shown partial success in digital-native environments, its application to real-world assets (RWAs) has proven far more problematic. Despite increasing experimentation with tokenization, institutional adoption remains limited. This paper argues that the primary barrier is not technological maturity, but a structural mismatch between on-chain execution and off-chain governance, legal authority, and fiduciary responsibility. Real-world assets embed discretion, enforceability, and institutional accountability that cannot be fully specified ex ante in code. Approaching the problem from an institutional adoption perspective, the paper reframes tokenization as an institutional design challenge rather than a software problem, with implications for policymakers, regulators, and institutional investors.

Key Implications

  • Governance precedes technology.
    Tokenization succeeds where legal authority, fiduciary responsibility, and decision rights are clearly defined before automation is introduced.

  • Automation cannot replace discretion.
    Real-world assets depend on judgment, intervention, and accountability mechanisms that cannot be fully codified ex ante.

  • Institutional adoption is constrained by trust, not efficiency.
    Execution speed and cost reduction matter at the margin, but governance clarity determines whether capital can be deployed at scale.

  • Tokenization should formalize existing institutions, not bypass them.
    Sustainable designs embed automation within recognized legal and organizational frameworks rather than attempting to substitute for them.

Keywords

Real-world asset tokenization; institutional governance; fiduciary duty; smart contracts; incomplete contracts; market infrastructure; institutional adoption; blockchain regulation; financial market design.

Recommended citation: Sing, C. H. (2025). Why “Code Is Law” Fails for Real-World Assets: Governance Gaps in Tokenized Markets. Working paper.
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