Why Tokenized Funds Will Scale Before Tokenized Projects

Abstract

Tokenization of real-world assets (RWAs) is frequently presented as a uniform technological shift across asset classes. In practice, adoption has followed a distinct and asymmetric pattern. Tokenized investment funds—particularly money market funds and similar pooled vehicles—have attracted early institutional participation, while tokenized infrastructure and project-level assets remain largely experimental. This paper argues that this sequencing is not accidental. It reflects differences in fiduciary risk, governance complexity, and market design requirements. Tokenized funds scale first because they inherit established legal structures, standardized governance, and familiar risk allocation frameworks, whereas tokenized projects introduce bespoke legal, operational, and governance challenges that institutional investors are structurally constrained to avoid.

Key Implications

• Institutional adoption of tokenization is governed more by fiduciary compatibility than by technological feasibility.
• Financial innovation diffuses sequentially, scaling first where existing legal and governance structures can absorb incremental change.
• Tokenization succeeds when it preserves clarity of authority, accountability, and enforceable oversight rather than attempting to bypass them.
• Project-level tokenization faces structural limits not because of immature technology, but because it disrupts established governance and risk-allocation frameworks.

Keywords

Real-world asset (RWA) tokenization; tokenized funds; institutional adoption; market design; fiduciary risk; governance structures; legal standardization; regulatory compatibility; project finance; financial infrastructure.

Recommended citation: Sing, C. H. (2024). Why tokenized funds will scale before tokenized projects: Institutional adoption, fiduciary risk, and market design. Working paper.
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