Digital Asset Diversification Through Real-World Assets – Unlocking New Horizons in Investment Education & Market Awareness

Executive Summary

The global financial system is entering a new phase, where the boundaries between traditional finance (TradFi) and decentralised finance (DeFi) are rapidly dissolving primarily due to real-world asset tokenization.

As blockchain evolves from a niche technology into a mainstream infrastructure layer for digital value, the tokenization of physical assets—ranging from real estate and commodities to intellectual property and fine art—is redefining ownership, liquidity, and access.

Historically, access to prime real estate, investment-grade art, and precious metals was reserved for institutional investors or high-net-worth individuals. The introduction of blockchain-enabled digital tokens now allows fractional ownership of these assets, opening up new avenues for wealth building.

Arecent report estimated that up to $16 trillion in real-world assets could be tokenized by 2030, representing 10% of global GDP. More conservative estimates by McKinsey and Deloitte point to a $3.5–$5 trillion tokenized market in the same timeframe, illustrating both the momentum and uncertainty in the sector.

At the same time, global investors are rethinking diversification. Traditional 60/40 portfolios (60% equities, 40% bonds) have shown declining performance amidst inflation, geopolitical volatility, and tightening monetary policy. Digital asset diversification, when executed with proper risk controls and education, can introduce uncorrelated alpha opportunities.

This whitepaper aims to highlight the concept of real-world asset tokenization and provide strategic guidance on how investors can benefit from integrating these instruments into their broader digital asset strategy.

Key Insights from This White Paper

1. Tokenization Offers New Opportunities but Comes with Unique Risks
   • Tokenizing real-world assets opens up possibilities such as fractional ownership, increased liquidity, and democratized access to high-value assets.
   • However, tokenized assets also introduce new risks including volatility, market risk, and counterparty riskthat traditional investments may not expose investors to. Investors must understand the risk-return dynamics of these new asset classes before diving in.

2. The Importance of Wallet and Custody Management

• Tokenized assets are stored in digital wallets, which can be either custodialor non-custodial. The choice between these options carries distinct risks and responsibilities.
• Investors must prioritize the security of private keysand understand the different types of wallets available (e.g., hardware, software, paper wallets). Multi-signature wallets can offer an extra layer of protection for larger portfolios.
• Custodial wallets, while convenient, require high trust in third-party service providers. On the other hand, non-custodial wallets give investors full control but demand greater personal responsibility in securing digital assets.

3. Due Diligence is Critical When Choosing Token Issuers and Platforms

• The proliferation of new tokenization platforms and issuers means that investors need to perform thorough due diligencebefore committing funds.
• Key factors to consider include the issuer’s credibility, regulatory compliance, and the security standardsof the platform.
• Smart contracts, the legal structure of the tokenized asset, and the potential risks of fraud or mismanagement must also be evaluated carefully.

4. Risk Management in Tokenized Asset Investment

• No investment is risk-free, and tokenized assets are no exception. Investors must manage risk by diversifying their portfolios and understanding the potential downside of their investments.
• It’s essential to set realistic expectations for returns, acknowledging the uncertainty and volatility that accompany investments in tokenized assets.

5. Legal and Regulatory Compliance

• The legal landscape for tokenized assets is still developing. Investors must stay informed about compliance requirementsthat could impact their ability to trade or hold tokenized assets.
• Understanding jurisdictional regulationsis crucial, as some countries may have stricter rules governing tokenized assets, while others may be more permissive.

Reimagining Diversification in a Changing Financial World

Diversification has long been the cornerstone of risk management in investment portfolios. Traditionally, this has meant spreading capital across stocks, bonds, commodities, and perhaps real estate. But with rising correlations between these asset classes—especially during times of economic stress—the traditional 60/40 portfolio is losing effectiveness.

Digital assets offer new forms of diversification. Among them, tokenized real-world assets (RWAs) stand out for their potential to deliver the security of tangible assets and the accessibility of blockchain infrastructure. Whether it’s a tokenized share in a luxury apartment in Paris or a fractional ownership of a fine art piece stored in a vault, the opportunity to diversify into these assets is no longer reserved for the wealthy elite.

In this new model, digital asset diversification extends beyond crypto volatility. It enables long-term portfolio planning, passive income from rental yields, and hedges against inflation—all powered by smart contracts and immutable ledgers.

What Are Digital Assets?

Digital assets are value representations stored and transferred in electronic form. They encompass various categories:

• Cryptocurrencies:Decentralized coins or tokens like Bitcoin and Ethereum that serve as digital money or utilities on blockchain networks.
• Stablecoins:Digital tokens pegged to fiat currency (e.g. USDC, Tether) or commodities, designed to maintain stable value for use in transactions and liquidity.
• Security Tokens:Blockchain-based tokens that represent ownership shares in equity, debt, or other financial instruments. These are typically regulated like traditional securities.
• Utility Tokens:Tokens that grant access to a service or product within a blockchain ecosystem (e.g. platform usage, decentralized apps).
• Real-World Asset Tokens:Blockchain tokens that digitally represent ownership of tangible assets, such as real estate, gold, art, or infrastructure projects.
• Digital Collections or Metatokens:(Though NFTs are out of scope, some digital collectibles represent content or data on-chain.)

Each category has different features and uses. For example, stablecoins bridge between crypto and traditional finance by providing a stable store of value, while security tokens digitize conventional investments.

Digital asset diversification means building a portfolio that includes a mix of these digital holdings (in addition to any other assets one may own). The goal is similar to traditional diversification: spreading risk across different types of investments.

The Case for Digital Asset Diversification

Diversification is a key principle of sound investing. By allocating capital to different assets, an investor can potentially improve the risk-adjusted return of their overall portfolio. Digital assets offer unique sources of risk and return, so they may complement other holdings. Several studies illustrate this:

• Sharpe Ratio Improvement:A Crypto Valley Journal analysis (2021) showed that even a small allocation to digital assets can raise a portfolio’s Sharpe ratio (a measure of return per unit of risk). For instance, adding just 4% of digital assets to a traditional portfolio improved the Sharpe ratio by 50–90% depending on the crypto index used. The optimal allocation in their model was around 20%. Notably, diversifying across multiple cryptocurrencies provided more benefits than holding Bitcoin alone.

• Moderate Allocation Suggested:Grayscale Research (2021)conducted stress tests on mixed portfolios and found that a roughly 5% allocation to crypto could be reasonable on average. They emphasize this as a general figure under certain market assumptions, not a recommendation. It reflects the idea that a modest crypto position might help long-term growth without dominating portfolio risk.

• Low Correlation:Digital assets often have different drivers than traditional assets. While correlations can change, historically cryptocurrencies have sometimes moved independently of stock or bond markets. (For example, one analysis noted Bitcoin’s correlation with U.S. equities rose from ~0.54 to 0.80 during 2019–2022but that was a recent trend; correlations can vary over time.) The key point is that the diversification benefit comes from combining low-correlated returns. The Crypto Valley Journal study found that the benefits of adding crypto remained even under assumptions of high correlation with other assets.

Taken together, these studies suggest that “digital asset diversification” can be a useful concept for investors willing to learn. By including some digital tokens or blockchain-backed assets, a portfolio might capture growth in emerging tech sectors. However, we stress the importance of caution: digital assets are highly volatile.

 The same 2021 study noted Bitcoin could roughly double the portfolio Sharpe ratio in a small mix, but also that multiple tokens did even better. This underscores both the opportunity (higher potential risk-adjusted return) and the danger (volatility is high).

Potential Benefits Of Digital Asset Diversification

• Risk Spreading:Not all digital assets move in lockstep. Holding a mix of crypto coins, tokens, and tokenized assets can reduce the impact of any single asset’s swing.
• New Growth Exposure:Digital assets are often associated with new technologies or sectors (e.g., blockchain infrastructure, decentralized finance). Diversifying into them can capture growth that might not occur in other asset classes.
• 24/7 Global Market:Unlike markets that close nightly, digital assets trade around the clock globally. This can improve liquidity and allow investors to respond quickly to news.
• Lower Barriers to Entry:Some tokens allow access to investments that were once out of reach. For example, owning a small fraction of a property via tokenization might require much less capital than buying whole assets.
• Educational Engagement:Diversification forces investors to research and understand multiple asset types. The process of learning about different digital assets inherently increases market awareness and knowledge.

But There Are Also Significant Risks And Considerations

• High Volatility:Cryptocurrencies and other tokens can exhibit large price swings. For example, in 2023 Bitcoin’s price rose dramatically but it remains subject to big intra-year drawdowns. Recent data shows Bitcoin’s volatility has actually fallen to historic lows as the market matured, yet it is still much higher than most traditional assets. Smaller “altcoins” or new tokens can be even more volatile.
• Market and Liquidity Risks:Some tokens may have limited trading volume or may be difficult to sell quickly at fair prices, especially during market stress.
• Regulatory Uncertainty:Rules around digital assets are evolving. Some tokens might be classified as securities or otherwise regulated, impacting their legality and tradability in certain jurisdictions. Regulation changes can cause sudden price moves.
• Technology Risks:Blockchain systems and smart contracts can have bugs or vulnerabilities. Hacks and technical failures are possible. If an underlying platform fails, the token could lose all value.
• Custody and Security:Digital assets require proper custody (often via private keys or wallets). Loss of keys, exchange hacks, or fraud can lead to irreversible losses.
• Speculative Environment:The crypto space has seen scams, false projects, and hype cycles. Careful due diligence is essential to avoid fraudulent schemes.

In summary, digital asset diversification is not a guarantee of safety or return. Rather, it represents a new frontier of assets that can enhance diversification if used wisely. Investors should thoroughly research each asset, understand the technology and legal status, and only allocate what they can afford to lose.

Real-World Asset Tokenization: Overview and Benefits

Real-world asset (RWA) tokenization is the process of creating blockchain-based tokens that represent ownership of tangible assets. In simple terms, it “tokenizes” something like property, commodities, or art into digital shares on a blockchain.

Tokenization“creates a virtual investment vehicle on the blockchain linked to tangible things like real estate, precious metals, art and collectibles.” Instead of a traditional paper deed, the asset’s ownership is encoded into smart contracts. Investors can then buy, sell, or trade tokens as if they were shares of that asset.

In practice, tokenization is already happening. For example, a company called Freeport issued 1,000 tokens for an Andy Warhol painting, so that each token represents 1/1000th ownership of the artwork.

As of that offering, an investor could own a fractional share of a multi-million-dollar painting for a few hundred dollars. Similarly, tokenized real estate platforms have issued blockchain-based shares of properties, allowing small investors to own pieces of luxury apartments or commercial buildings.

Key advantages of real-world asset tokenization include:

• Fractional Ownership:Tokenization breaks a large asset into many small tokens. This lets investors own “fractions” of high-value assets. For instance, instead of buying an entire property, an investor might acquire 0.1% of it via tokens. Coinmetro notes that fractional ownership on blockchain“lets people buy small parts of pricey real estate.” Lower entry barriers mean more people can participate in previously inaccessible markets.
• Increased Liquidity:Traditionally, selling a physical asset (like real estate or art) can be slow and costly. Tokenization creates a market for the tokens, which can be traded 24/7 on digital platforms. This makes assets more liquid because tokenization “allows fast, efficient 24/7 trading of items that traditionally only could be done during ‘working hours.” In practice, this could shorten the time to exit an investment from months to minutes.
• Lower Costs:By putting ownership on a blockchain, tokenization can eliminate some intermediaries. For example, selling tokenized real estate may bypass or reduce broker and legal fees. Blockchain-based ownership “lowers costs by removing middlemen like lawyers, brokers, banks, etc.”Smart contracts can automate compliance checks and payments (like rent distributions), further reducing ongoing expenses.
• Transparency and Security:Blockchains provide an immutable record of all transactions. Every trade and ownership change is timestamped on the ledger. This transparency increases trust: fraudulent claims of ownership are much harder. The on-chain process “increases trust and accountability for traders.” Smart contracts also enforce rules automatically, reducing human error.
• Global Access:Tokens can be bought by anyone with internet access, regardless of geography. This opens up assets to international investors without cross-border friction. A property token on Ethereum or another chain is borderless. Tokenized real estate “opens high-value properties to more investors… boosting liquidity”. In effect, assets no longer belong only to local markets or wealthy elites.
• Programmability:Tokens can include features like automated dividends or voting rights via smart contracts. For example, a token representing rental property could automatically send rental income to all token holders proportionally. This programmability is a novel feature of blockchain tokens and can streamline the distribution of benefits.

Real-World Assets Ready for the Digital Leap

Real Estate: Luxury properties and investment projects are being tokenized. For example, the St. Regis Aspen Resort (an $18M Colorado hotel) was tokenized via “Aspen Coin,” making it a fractional investment. RealT is another platform where investors can buy token shares of New York and San Francisco properties for as little as $50. This democratizes real estate investing across income levels.

Fine Art and Collectibles: High-end art and collectibles are also on the blockchain. Freeport’s Warhol tokens are one example. Other platforms have tokenized famous paintings, vintage cars, and even rare wines. Investors gain exposure to these often illiquid assets without owning the physical item.

Precious Metals: Tokenized gold and silver allow digital ownership of bullion. Paxos Gold (PAXG) tokens are each backed 1:1 by a fine ounce of LBMA-approved gold stored in vaults. Similarly, the Matrixdock XAUm token is fully backed by LBMA gold reserves. These tokenized metals combine the stability of gold with the flexibility of cryptocurrencies.

Investment Funds and Debt: Some financial instruments are going digital. For instance, tokenized funds or funds of funds let investors use crypto platforms to invest in traditional asset pools. A notable case is BlackRock’s “BUIDL” token, a pilot for a tokenized fund of U.S. Treasuries (though U.S. Treasury debt is a regulated asset class, it shows how major institutions experiment with tokenization). Such examples illustrate how conventional investments might become blockchain-accessible.

Infrastructure and Green Projects: Companies are tokenizing projects like renewable energy installations. The “COSOLAR Initiative” tokens fractional ownership of a solar power plant for climate-conscious investors. Tokenization could similarly finance infrastructure, making it possible for many to own a share in long-term projects. Carbon credits have also been tokenized to improve traceability.

Market Landscape and Growth Prospects

The tokenization trend has gained significant attention, and market projections are impressive (though inherently speculative). Industry analyses forecast massive growth in tokenized assets over the coming years:

• Large Total Addressable Market:Roland Berger (2023) conservatively estimates that tokenized assets could exceed USD 10 trillion by 2030, a roughly 40-fold increase from about $300 billion in 2022. This includes tokenized real estate, funds, equity, commodities, and more. Their figure assumes only a small percentage (<1%) of overall assets become tokenized, underscoring the large underlying market size.
• Strong Growth Rates:A Daxos Capital report notes the market reached about $600 billion in2023 and projects a compound annual growth rate (CAGR) of ~40% through 2032. This would drive the total tokenized market into the multi-trillions.

These analysts highlight that real estate, debt, and financial funds are expected to dominate this growth (given their high prevalence in underlying markets). In other words, tokenization could soon be material in the global economy.

• Crypto Market Expansion:The broader crypto market has also been expanding. CoinGecko reports that the total cryptocurrency market cap doubled in 2023, from $0.83T to $1.72T. By early 2025, overall market capitalization has continued to grow, reflecting renewed interest and institutional engagement. This overall growth in digital asset value underpins the tokenization narrative by raising capital and infrastructure for blockchain ecosystems.

These figures indicate enormous potential, but they should not be taken as guarantees. They assume continued innovation, regulatory clarity, and adoption by investors. Historically, new asset markets often take time to mature.

Sincetokenization is an emerging frontier, the forecasts are based on early trends and optimistic scenarios. Real-world adoption will depend on factors like regulatory acceptance, technology standardization, and investor trust.

Beyond owning tokens directly, the digital asset ecosystem includes derivative products—contracts whose value is derived from underlying crypto or token prices. Familiar examples are futures and options on cryptocurrencies. These allow traders to hedge or speculate without holding the actual token.

Recently, crypto derivatives volumes have grown rapidly: one industry report noted that derivatives trading doubled in 2024, up 132% over 2023. Bitcoin and Ethereum futures/options are especially popular on major exchanges.

However, derivatives introduce extra complexity and risk. They often involve leverage (amplifying gains and losses) and may require sophisticated margin management. For example, perpetual swap contracts can have no expiration but use funding rates to tether prices to spot markets—concepts that are advanced for casual investors. Crypto options can likewise be structured in various ways (calls, puts, spreads) that require in-depth knowledge to use safely.

At Kenson Investments, we believe it’s important to understand these tools at a high level. Our focus remains on spot ownership of tokens and understanding the underlying markets.

We want investors to know that futures, options, swaps, and other crypto derivatives exist, but these are advanced, unregulated products (in most places) with high risk. The mere existence of large derivatives volume shows institutional activity, but it also means retail investors must be extremely careful. Many regulators have warned of the dangers of crypto derivatives, and indeed, a misstep in leveraged trading can lead to rapid losses.

Risks and Considerations

When discussing digital asset diversification and tokenization, it’s critical to acknowledge risks. Kenson Investments’ goal is transparency: we want readers to make informed decisions, knowing both the upsides and potential pitfalls. Below are key risk areas to consider:

• Market Volatility:Cryptocurrencies and newly tokenized assets can have much higher volatility than most traditional investments. Prices can swing by 10–20% or more in a single day.

For example, even Bitcoin has experienced dramatic rallies and falls over the years. (Interestingly, Bitcoin’s volatility has trended lower recently, but it remains higher than many legacy assets.) Altcoins and niche tokens are often even more volatile, due to thinner markets.

High volatility means you should expect rapid changes in your portfolio value. This can be unsettling, and it underscores the importance of only investing funds you can afford to lose.

• Technology and Security Risks:Blockchain technology is robust, but it’s not immune to failure. Smart contracts (the code that runs tokens) can have bugs. Hacks and exploits do happen. There is also the human factor: if private keys or wallet passwords are lost or stolen, access to tokens is irrevocably lost.

Centralized platforms (exchanges, custodians) can also be hacked or go bankrupt (as seen with notable cases in crypto history). Kenson strongly advises using secure custody practices: hardware wallets, trusted platforms, and multi-signature arrangements for significant holdings. Always verify the technical security of any token project (e.g. audited contracts).

• Regulatory Uncertainty:Government and financial authorities around the world are still defining rules for digital assets. In the U.S., for instance, some tokens are considered securities by the SEC, others are viewed as commodities by the CFTC, and stablecoins are under discussion by regulators.

Globally, jurisdictions vary widely: some countries have embraced digital assets (Singapore, Switzerland, UAE, etc.), while others have strict bans or restrictions. Regulatory changes can impact token values overnight (e.g., a ban or a new license requirement). Investors should stay updated on legal developments.

• Lack of Insulation:Unlike banks or insured investments, crypto holdings usually do not have consumer protections. If you lose funds due to fraud or platform failure, there is generally no government insurance. This means due diligence is vital: use reputable service providers, understand their custody solutions, and be skeptical of any “too good to be true” schemes.
  • Liquidity Risks:Not all tokens trade on liquid markets. Some newly issued tokens or niche real-world asset tokens may have few buyers/sellers, making it hard to exit without moving the price. Before investing in a token, check how easy it is to trade. Illiquid tokens may see large bid-ask spreads and price slippage.
• Operational Complexity:Using blockchain often requires additional steps (setting up wallets, understanding blockchain transaction fees (“gas”), ensuring correct networks, etc.). These technical hurdles can lead to errors (like sending tokens to the wrong address). New investors should take time to learn the basics of wallet management and blockchain operations in a safe environment (test networks, small trials) before committing large sums.
• Psychological Factors:The crypto space is known for hype cycles and strong emotions. Media coverage, influencer opinions, and “fear and greed” can drive sharp market moves. Investors should watch out for impulsive decisions. We recommend dollar-cost averaging (investing fixed amounts regularly) and setting clear risk limits.

Regulatory and Compliance Overview

The legal framework for digital assets is evolving rapidly. While we do not offer legal advice, investors need to be broadly aware of regulatory themes:

• Securities and Token Classification:Many jurisdictions now treat certain tokens as securities if they represent an expectation of profit from the efforts of others (an investment contract). This means some crypto tokens or security tokens must comply with securities laws (registration, disclosure, investor eligibility). Regulatory agencies are scrutinizing token offerings and exchanges. Make sure any token-backed asset you consider is compliant with laws applicable to your region.
• AML/KYC Rules:Centralized crypto exchanges and some token sale platforms require identity verification and anti-moneylaundering (AML) checks. If you interact with these services, be prepared to provide personal identification. This is similar to how traditional financial accounts work, but always done carefully through secure channels.
• Consumer Protection:Unlike bank accounts or regulated investment accounts, crypto accounts on many platforms are not protected by government insurance (e.g., FDIC in the U.S.). This means platform failures or hacks can leave your funds at risk. Regulatory frameworks (such as licensed custodians or bond requirements) are being developed in places, but coverage is limited. Only deposit what you are prepared to lose without insurance.

The regulatory environment is dynamic and complex. Kenson encourages all investors to stay informed on the latest laws in their country. Many regulators publish guidance on digital assets – reading those official sources (or summaries by trusted advisers) is prudent. When in doubt, treat the asset conservatively.

Technology That Powers Trust and Compliance

Tokenization doesn’t happen in a vacuum. Several technologies and standards ensure its safe and legal execution:

• Smart Contracts:Automate distributions, trading, and compliance.
• ERC Standards (e.g., ERC-1400):Tailored for security tokens with embedded compliance.
• Custodianship and Escrow Services:Ensure the physical asset is securely stored.
• Regulatory Nodes:Jurisdictions like Switzerland, Singapore, and Dubai are leading frameworks that blend decentralization with compliance.

Kenson Investments partners with regulated platforms that integrate these layers, ensuring that every tokenized asset we offer insights into also adheres to regional laws and investor protection standards.

What Investors Must Know

As the tokenization of real-world assets (RWAs) becomes more widespread, educating investors is crucial to ensuring they are equipped to make informed decisions in this evolving space.

While tokenization unlocks a range of new investment opportunities, it also introduces a host of complexities and risks that need to be understood before venturing into these markets.

Proper investor education not only facilitates informed decision-making but also helps mitigate potential pitfalls, empowering investors to navigate the changing landscape of digital assets and traditional investments.

1. Grasping Risk and Return Dynamics of RWAs

The core principle of any investment is understanding the risk and return dynamics, and tokenized real-world assets are no exception. While tokenization offers increased liquidity and fractional ownership opportunities, the fundamental characteristics of the underlying asset—such as market volatility, asset depreciation, or legal and financial risks—remain the same. Tokenization merely represents a more accessible and digital way of owning a portion of that asset.

Investors must assess:

• Asset volatility: Tokenized RWAs can still be subject to significant price swings depending on the underlying asset’s market behavior. For instance, tokenized real estate might be less volatile than digital currencies, but it still carries cyclical market risks and market-specific factors like interest rate changes or shifts in local economies.
• Liquidity: One of the key advantages of tokenization is enhanced liquidity. However, not all tokenized assets enjoy the same liquidity profile. For example, tokenized high-value real estate assets may face lower trading volumes compared to more liquid assets like tokenized gold.
• Market sentiment: Like traditional investments, tokenized assets can be influenced by macroeconomic trends such as inflation, economic downturns, or regulatory changes. Understanding these dynamics helps investors anticipate how their tokenized assets might perform under different market conditions.

A thorough grasp of these factors is essential for any investor seeking to integrate RWAs into their portfolio. Without a deep understanding of the risk and return potential of these assets, an investor may misjudge their exposure or fail to properly diversify their holdings.

2. Wallet and Custody Management for Tokenized Assets

Managing the security and storage of tokenized assets is one of the most critical aspects of digital asset investing. While traditional asset classes like stocks and bonds are managed through brokers and custodians, tokenized assets require a different set of tools, most notably digital wallets and custodial services that support blockchain-based assets.

Investors must understand:

• Wallet types: Digital wallets come in various forms, including software wallets, hardware wallets, and custodial wallets. Each type has its own advantages and risks. Software wallets are typically more convenient but are vulnerable to hacking, while hardware wallets provide robust security but require more manual effort for transactions.
• Custody solutions: For investors looking to hold larger tokenized asset portfolios, using a third-party custodian may be a viable option. These custodians offer increased security and insurance, protecting against potential losses from theft or fraud. However, choosing the right custodian requires due diligence and an understanding of the fees, services, and regulatory compliance of the platform.
• Private keys and security: A key element of wallet management is the control of private keys. Losing a private key means losing access to the tokens, and no one can recover them. Hence, robust security measures such as multi-signature authentication, offline storage solutions, and regular backups are vital to safeguarding one’s digital assets.

By understanding these facets of wallet and custody management, investors can take proactive steps to secure their holdings, ensuring that their assets are safe from digital threats and unauthorized access.

3. Navigating Tax and Legal Obligations in Multiple Jurisdictions

One of the most complex aspects of tokenized asset investing is understanding the tax and legal obligations associated with these assets. Tokenized RWAs are subject to different legal and tax regulations depending on the jurisdiction in which they are held, traded, or utilized.

Investors must be aware of:

• Tax implications: The tax treatment of tokenized assets can vary widely between countries. Some jurisdictions treat tokenized assets as capital assets subject to capital gains tax, while others may classify them as income or business assets. Additionally, the classification of tokens themselves—whether as securities, commodities, or currencies—can also affect their tax obligations.
• Cross-border issues: Tokenized assets that are held in different jurisdictions may be subject to multiple sets of regulations, adding complexity to tax filings and compliance. Cross-border transactions and asset transfers may also trigger additional reporting requirements, such as FATCA (Foreign Account Tax Compliance Act) or CRS (Common Reporting Standard) obligations, depending on where the investor resides.
• Regulatory differences: Some countries have embraced tokenization and blockchain technology with favorable regulations, while others have imposed restrictions or outright bans. Understanding these regulatory frameworks is essential to ensure that investments remain compliant with local laws, avoiding potential legal consequences.
• Tax reporting and recordkeeping: Investors in tokenized assets are often required to keep detailed records of all transactions, including the acquisition cost, transaction history, and any profits or losses. Tax authorities may require this information for annual filings, so accurate and comprehensive reporting is necessary to avoid penalties.

Given the complex and ever-evolving tax and regulatory landscape, investors should seek advice from tax professionals who specialize in cryptocurrency or tokenized assets, particularly when investing across multiple jurisdictions.

4. Conducting Due Diligence on Token Issuers and Platforms

As with any investment, conducting thorough due diligence is paramount. However, the tokenized asset space introduces additional risks because the platforms and issuers involved may not always be as well-established or regulated as traditional financial institutions.

Investors should conduct a thorough background check on:

• Issuer credibility: Researching the entity behind the tokenized asset is critical. Investors should examine the track record of the issuer, their history in the asset class, and any relevant financial disclosures. For example, a tokenized real estate platform should demonstrate a clear history of successful real estate projects and transparency about ownership and governance structures.
• Platform security: Not all tokenization platforms offer the same level of security and reliability. Assessing the platform’s technological infrastructure, smart contract audits, and regulatory compliance will help gauge its security. Investors should check for third-party security audits to verify that the platform has taken the necessary precautions to protect against hacking or fraud.
• Legal framework: Understanding the legal structure of the tokenized asset is crucial to protecting one’s investment. This includes the verification of ownership rights, intellectual property protections, and the legal standing of the tokenized asset. Platforms that are unclear about their legal framework should be approached with caution.
• Market transparency: A lack of transparency in market operations or governance could lead to hidden risks. Investors should look for platforms that provide clear and open communication about fees, liquidity, and processes for buying and selling tokenized assets. Platforms with opaque operations or undisclosed fees should be avoided.

By performing diligent checks on token issuers and platforms, investors can reduce their exposure to fraudulent schemes and ensure that they are working with trustworthy, secure entities.

Kenson Investments: Empowering Investors with Education and Resources

At Kenson Investments, we recognize the importance of investor education in the growing world of tokenized assets. We are committed to supporting our clients with the knowledge and tools they need to succeed.

Through a combination insightful consultations and educational resources, we ensure that investors are well-equipped to navigate the complexities of digital asset investment.

Our team of digital asset specialistsprovides tailored guidance to help you understand the nuances of tokenization, as well as how to assess risk, manage assets securely, and comply with international regulations.

By prioritizing education and providing transparent, up-to-date resources, Kenson Investments empowers investors to confidently explore the world of tokenized real-world assets and seize the new opportunities it presents.

Explore what’s next. Discover new horizons in digital investing with Kenson Investments today.