According to the 2025 report, the MSME finance gap in the formal sector worldwide exceeds $5 trillion, and, if we also consider firms in the informal sector, the gap increases by an additional $3 trillion. The SME credit gap in India alone is over ₹30 lakh crore and only 15 to 20% of the demand is met by the formal financial sector. Because formal credit is severely limited, there are few pathways to grow companies and a need for investors to put their money to work in a transparent manner.
This is where RWA tokenization comes into play: RWA tokenization is the act of anchoring real world assets on-chain, connecting previously underserved businesses with global capital. Decentralized capital pools such as Tinlake have demonstrated how tokenized pools of capital can provide liquidity to small businesses while providing investors with yield backed by real-world assets. With the RWA tokenization market now worth over $24bn and growing rapidly, the model innovated by Tinlake is helping to lay the foundation for a new era of SME financing.
What is an RWA Token and How Does it Work?
Breaking down the concept of Real-World Asset (RWA) tokens
RWA Tokens are digital assets that exist off-chain. These RWAs can represent anything from physical assets (such as real estate or invoices) or financial products (such as commodities or cash flows in the future). Tokenizing RWAs on-chain allows for ownership and transfer of assets to become more transparent, traceable, and programmable. The ownership is written in smart contracts, so no paper or long approval process is necessary to make sure ownership is correctly logged, and even small businesses can collateralize real assets as digital assets and receive money much faster than customary banks are able to grant loans.
Linking tangible assets to blockchain for fractional ownership
One of the biggest innovations of tokenization is fractional ownership. For example, a building, invoice, or loan obligation can be divided into hundreds or thousands of tokens. As a result, tokenization allows everyday investors to invest in areas usually restricted to large institutions, such as small business loans or real estate developments. A small investor with a few hundred dollars can buy a small stake in a diversified pool of small business loans or development projects. This not only widens access to investment opportunities, but also provides liquidity, as companies do not need to rely on banks but rather are able to tap global markets.
Why tokenization is more than just digitization
Tokenization should not be confused with digitization, which is the process of converting documents or images from a physical format to a digital format. Tokenization places rights, governance and transferability on a blockchain. RWA tokens can further automate various mechanisms, such as KYC/AML, governance, and payout mechanisms, allowing for frictionless global participation in financial products. This is how assets can be owned, traded and used. Because of the transformational way tokenization changes asset ownership and usage, it has been seen as one of the best ways to bridge customary finance and decentralization.
Tinlake as a Case Study: The Blueprint of Decentralized Financing
Overview of Tinlake’s business model
One of the best known platforms to offer RWA tokenization is called Tinlake. It was developed by the company Centrifuge. The business idea is simple, yet powerful: RWAs are tokenized and used as collateral in a decentralized financing protocol (I.e., invoices, trade receivables, and real estate, etc). In Tinlake, the borrowers assemble pools of these tokenized assets. Investors provide liquidity to pools in exchange for returns. It is this combination of DeFi and real-world asset lending that forms the basis of Tinlake’s lending and borrowing protocol, created to make the borrowing and lending process more efficient and accessible.
How Tinlake connects investors and borrowers through token pools
The beauty of Tinlake is that it is possible to deposit tokenized assets into the pools and for investors to invest into two classes of tokens: Senior and Junior tokens. The former is the less risky class and earns a stable return, whereas Junior tokens are higher risk and yield more. The tranching structure allows investors to choose their risk while allowing borrowers to have a fast, transparent and decentralized process to access credit. With smart contracts used in Tinlake, a high degree of automation becomes possible, giving rise to more efficiencies and trust in the system, and obviating the need for intermediaries between both sides of the market.
Key successes and lessons learned from Tinlake’s journey
As of today, Tinlake has eased the issuance of loans for hundreds of millions of US dollars to small businesses, asset originators around the world, and shown that blockchain credit markets can be responsible as well as liquid. Some lessons learnt along the years include the need to be compliant with local regulations, using KYC and AML processes to protect investors and bring legitimacy to the market. Building trust in the product also requires transparency, thus every transaction, collateral and yield allocation is verifiable on-chain. These successes further strengthen Tinlake’s status as a pioneer in showing how RWA tokenization can connect customary and decentralized financial systems.
The Business Potential of Launching an RWA Token Platform
Market demand and projected growth in RWA tokenization (2025 outlook)
The numbers are in: RWA tokenization is no longer an experiment. It is one of the fastest growing segments in blockchain. By 2023, estimates put the value of tokenized RWAs at about $3 billion. By mid-2024, that number exceeded $8 billion, driven by institutional adoption and DeFi integrations. Analysts expect the combined market to reach over $16 trillion by 2030, with predictions that 2025 marks the start of a surge in adoption due to demand for transparency, programmatic financial instruments on-chain with pricing from oracles and collateral from on-chain instruments. Entrepreneurs who build an RWA token platform today will likely ride one of the most lucrative waves of this decade.
How SMEs gain access to affordable liquidity
Small and medium enterprises face other challenges in bank credit too, including lengthy credit application processes, high collateral requirements, as well as unequal turnaround times between credit applications and approvals. RWA tokenization removes these obstacles to some extent. By tokenizing invoices, trade receivables, or physical assets, SMEs can use those tokens as digital collateral in a decentralized marketplace, allowing lenders to approve loans more quickly, charge lower interest rates, and expand the pool of potential lenders. SMEs are no longer limited to the policies of a single bank, but can draw from a global pool of investors who want to help businesses expand. This democratization of credit allows SMEs to obtain the funding they need to grow their business without bureaucratic hurdles.
Why investors are drawn to real-world backed tokens
Yield-hungry investors want security, while crypto assets are often volatile. Crypto assets typically promise high returns, which results in investors always being on the lookout for a good compromise. This is achieved through RWA tokens that use real estate, invoices, commodities, etc. as collateral, while the nature of pools, risk tranches and on-chain transparency helps investors match their desired risk appetites to either a more stable return or a speculative yield. A cherry on top is that RWA pool yields are typically higher than conventional fixed income bonds or savings accounts in an era of inflation that erodes cash savings. In short, RWA tokens allow investors to diversify while remaining within the blockchain system.
Looking to launch your own RWA tokenization platform?
Key Components of Building an RWA Token Like Tinlake
Legal and Regulatory Compliance
In all RWA token projects prior to the technology, the first step is compliance. Businesses often set up a separate entity, known as a Special Purpose Vehicle (SPV), when bridging a blockchain to real assets. These entities hold the assets under legal framework so that on-chain value of the tokens matches underlying assets’ market value. Without SPV, investors may lose confidence in the project as they have no legal claim to the underlying asset.
KYC and AML regulations also require investors and borrowers to be verified in order to prevent money laundering and fraud. DeFi demands privacy. RWA tokenization is about trust and thus related to compliance with legislation that may differ between jurisdictions, with a global operation needing to ensure that its structures work in all of the jurisdictions in which it undertakes business. This prevents future delays= build your legal foundations before launching fully to avoid roadblocks in a project.
Asset Structuring and Token Standards
Choosing the right token standard for your project is like choosing your platform’s DNA. ERC-3643 (formerly T-REX) or ERC-1400 were built specifically for security tokens/RWAs, allowing developers to program in transfer restrictions, compliance, and other rights and obligations directly into the token at the contract level.
Besides these compliance requirements, tokens based on real-world assets need to reflect the true economics of ownership, governance, voting rights and payout. Fractionalization is the division of real-world assets such as invoices, loans, real estate or other illiquid assets into smaller tradable units opening up these assets to a wider investor base. It is this fractionalization that transforms these RWA tokens from a digital representation into a programmable financial instrument with embedded logic.
Technology and Smart Contract Development
The smart contracts behind the RWA platform are its engine room, dictating everything from token minting and collateral maturity to investor payouts. Security is particularly critical: flaws in DeFi smart contracts have resulted in the loss of tens of millions of dollars, so these contracts undergo wide-ranging audits.
To connect the off-chain and on-chain worlds, the platform relies on oracles to provide data such as invoice payment status and updates to the blockchain. Without oracles, the tokenisation system would be divorced from reality, as it would not reflect real-world information. Layer-2 scaling solutions, such as Arbitrum, Optimism, or zkSync, increase availability through lowering transaction fees and speeding up transaction confirmation, so the platform does not get stuck during Ethereum congestion.
Custody and Settlement Infrastructure
To create trust in the market for RWA tokens, custodial arrangements are often required where the underlying assets (e.g. real estate deeds, invoices or trade receivables) are legally tied to the tokens in circulation. This provides assurance to investors that their tokens have a corresponding form of backing and are not detached.
Modern tokenization also relies on digital verification, such as linking legal documents, asset information, and proof of ownership to the blockchain to build confidence through transparency. Settlement needs to be smooth too, so repayments and interest distributions are automated and investors know from the outset when and how they will be paid.
Marketplace and Liquidity Setup
A token without liquidity is like a car without wheels-it can’t go anywhere. That’s why primary issuance platforms play a pivotal role in enabling the tokenization of assets and fundraising for SMEs. Once a token is issued, liquidity is of paramount importance. Onboarding DEXs and CEXs allows for tokenized assets to be traded in secondary markets, giving investors the option to liquidate their investment.
Liquidity isn’t just about access; it’s also about price stability and the tools to reduce slippage, price discovery, and investor confidence. This can be achieved through market making, incentive pools, or exchange listings. A platform with a successful liquidity strategy ensures that its tokens do not just exist, they thrive.
Funding Model: How Investors Earn and Borrowers Benefit
Yield generation for token holders
Investors are attracted by the reliable yield offered. Unlike speculative crypto assets, RWA tokens are backed by tokenized versions of real-world assets, including invoices, trade receivables, and real estate. This creates a steady inflow of return, however many platforms such as Tinlake use a dual-token system to differentiate between Senior and Junior tokens to balance risk. The dual-structure approach offers stable and secure returns to Senior investors and higher returns at the cost of additional risk for Junior investors. This dual approach is appealing to risk-averse investors seeking stability and also to those with higher tolerance to risk searching for higher returns.
Loan repayment structures for SMEs
On the other side, SMEs receive clearer and more flexible repayment schedules. Instead of having to deal with a nontransparent banking system and high interest rates, businesses can get loans against tokenized collateral and repay them on flexible schedules encoded in smart contracts. The repayments are made automatically and do not require any manual action, reducing operational costs and increasing the investors’ confidence in the loan they issued. For SMEs, it can mean accessing working capital in days rather than weeks or months, allowing them to spend time growing their business rather than chasing and managing paperwork.
Sustainable business models balancing both sides
The real innovation, however, is the sustainability this business model provides: it enables borrowers to obtain affordable credit, while returns to investors are usually higher than those provided by low-risk customary products. Platforms support sustainable borrowing by sharing risk: for example, tranching risk and collateral verification, along with transparent reporting to minimize default-related losses for lenders. By aligning incentives, these RWA token platforms create a world in which money moves, companies flourish, and investors earn steady yields: where finance doesn’t have to be a zero-sum game.
How to Launch Your Own RWA Tokenization Platform in 2025
Step-by-step process: from concept to live platform
Building an RWA tokenization platform is not instantaneous. Identifying which asset class you want to tokenize is the first step, since pipelines may differ for tokenizing invoices, real estate, commodities, or trade receivables, among others. Then you have token model, deciding how you are going to store ownership, rights and yields on-chain. If you have a solid model, the platform can begin building the smart contracts, verifying compliance and onboarding investors. This includes testing, security audits, and a public launch that finally enables SMEs and investors to interact. You need to view this process as a full lifecycle, from validating your idea to scaling liquidity pools post-launch.
Choosing the right blockchain and technology stack
Selecting a blockchain is one of the most important decisions for a tokenization project. For now, Ethereum is the gold standard for security and network effects, but Layer-2 blockchains (such as Arbitrum, Optimism, or zkSync) are becoming increasingly appealing due to their speed and low fees. Other projects can use sidechains, such as Polygon, or enterprise chains compliant with RWAs. Projects will require access to audited smart contracts, oracles to connect real world data, integrated wallets, and KYC/AML functionality. You need a stack that can support hundreds of investors across pools of assets and regulatory checks, without impacting performance.
Working with legal, custodial, and liquidity partners
Few platforms create their own liquidity, so law firms that specialize in digital securities are important because they ensure the SPVs, licenses and compliance are in order. Custodians or trustees hold the underlying collateral storage, whether that be documents, titles or collateral, in the real world and ensure the assets are secured and verified. Liquidity partners like market makers or DeFi platforms are then needed in order to help ease trading. Creating a group of trusted partners has improved the platform’s legal compliance while also establishing credibility with borrowers and investors.
Cost estimation and budgeting (development, legal, compliance)
The cost of building a tokenization platform for RWAs ranges from $80,000 to $150,000, depending on the project’s complexity. If you are tokenizing RWAs across jurisdictions, consider adding an additional $50,000 to $100,000 to cover legal structuring and compliance costs. Then there are the other costs: audits and custodial costs, marketing, community management, etc. Startup costs for a well built compliant launch can range from $150,000 to $300,000. It may sound expensive, but this is a small price to pay for the revenue that will be generated from the platform and the goodwill of the investors.
Conclusion
RWA Tokenization has the potential to reshape the financing landscape for SMEs by creating a mechanism to tap real assets for low-cost liquidity while offering investors secure asset-backed yields. The approach is sustainable for SME lending and scalable for the finance industry as a whole. Tinlake and others have already provided a glimpse of what is possible. The market will only get more competitive in 2025 and beyond, so for businesses wanting to move at the profit-maximizing speed, expert help can go a long way. Blockchain App Factory offers RWA Tokenization Services that can help you to design, build and launch compliant platforms that will transform real world assets into digital opportunities.
