The next challenge for tokenization isn’t just about bringing assets onchain

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Tokenization is one of the most discussed areas in crypto as everything from U.S. Treasuries to private credit gets brought onchain. But under the surface, the narrative and attention is changing: The race to tokenize all assets is giving way to a more nuanced effort to integrate these systems into financial systems. 

“Just tokenizing an asset isn’t enough,” Ayyan Rahman, co-founder and chief growth officer of OnRe, said on StrataMedia’s Talking Tokens podcast recently. “If you’re doing it for the sake of tokenization and there’s no strategy afterwards, it doesn’t work.”

That shift from providing access to legitimate integration is becoming the defining factor differentiating projects that gain traction and those that don’t. Just putting an asset onchain isn’t enough, there needs to be utility and a bigger purpose.

Early crypto efforts largely aimed to mirror traditional finance by wrapping familiar products like equities and debt onchain. But there was still friction within the design, Rahman noted, saying that while DeFi can work as a distribution layer, it’s also a system with its own mechanics that most RWAs weren’t designed to support.

“You have to structure the asset so it actually works within DeFi,” Rahman said, pointing to liquidity design, redemption mechanics and risk pricing as areas that need to be rethought from first principles.

OnRe is taking a stab at that by focusing on less crowded categories like reinsurance, a market that sits largely outside of crypto’s typical risk appetite. The startup provides tokenized reinsurance on Solana through its ONyc yield-bearing asset. 

Traditionally, access to reinsurance was limited between insurers and reinsurers, but tokenization opens up the structure by allowing capital to flow continuously rather than in fixed cycles. Such an approach has helped OnRe more than double its assets under management to about $130 million within months, Rahman said. 

“The yield isn’t tied to crypto volatility,” Rahman said. “It comes from what we’re underwriting [like] property catastrophe exposure, weather patterns, geographic risk.”

Still, bringing assets like reinsurance onchain exposes a deeper misalignment, because DeFi lending markets are built around volatility and demand for leverage, while underwriting-based assets operate on entirely different timelines and risk models. Rahman said that makes pricing difficult and forces one to rethink how these assets are integrated.

“You can’t price RWAs the same way you’ve priced DeFi lending for the past five years,” Rahman said. Platforms will have to differentiate assets more explicitly based on risk, he added. 

And in an environment where exploits are unfortunately happening frequently, secure structure matters more than ever. For RWA issuers, it’s not just about generating yield but ensuring assets can withstand liquidity shocks, redemption pressure and shifting market sentiment.

For it to scale, RWAs must offer an incremental use case, such as collateral, integrated into lending markets or combined with other DeFi primitives. That would let them function as productive financial instruments instead of sitting idle as passive holdings.

However, Rahman thinks the market remains underdeveloped, estimating that less than 10% of RWA projects are structured effectively. He claims that many projects still operate as opaque systems that haven’t meaningfully attracted crypto-native capital. 

The projects that succeed will be those that rethink how assets are built from the ground up and how they’re priced, distributed and integrated into onchain systems, he said. 

The first wave of tokenization proved that billions of dollars in assets could be brought onchain, and the second wave will be about testing whether they actually belong there. 

“It shouldn’t be about why you’re tokenizing,” he said. “It’s about how.”

Check out the next section for more details and the full episode.

For today’s episode, I interviewed Ayyan Rahman, co-founder and chief growth officer at OnRe, about why most real-world asset (RWA) projects in crypto are fundamentally misaligned with how DeFi actually works.

Ayyan explains that tokenization alone isn’t enough and that many RWAs today function more like repackaged traditional finance than truly composable on-chain assets. He breaks down why this creates a risk of “Wall Street exit liquidity,” and what it actually takes to build an asset that integrates properly into DeFi systems.

The conversation explores why reinsurance offers a unique source of uncorrelated yield, how tokenization can unlock more efficient capital scaling, and why liquidity, redemption mechanics, and risk modeling need to be rethought for on-chain markets.

They also discuss the impact of Drift Protocol’s exploit on market confidence, what stress reveals about DeFi systems, why the idea of “risk-free yield” is flawed, and how institutional capital is evaluating onchain opportunities. The episode closes with a broader look at where crypto is heading from speculative markets toward more structured, resilient financial systems built around real assets.

This episode is a part of the Solana Sessions campaign that Token Relations and the Talking Tokens podcast are doing, diving into founders’ journeys and startups building on Solana. Check out the accompanying newsletter on here.

TIMESTAMPS:

00:00 Introduction

00:32 The Tokenization Illusion

01:59 Tokenization vs Reality

03:15 Why Reinsurance Actually Matters

06:22 The Real Unlock: Scaling Capital

09:05 Building a DeFi-Compatible Asset

12:14 What Breaks DeFi Under Stress

17:13 The Question That Actually Matters

22:07 Redefining Risk in DeFi

23:49 The Yield Trap

29:06 Best Gameplan for Growth

36:37 Where Adoption Actually Comes From

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Please note this content is for informational and educational purposes only. Any views shared should not be considered financial advice, nor should it be used to make investment decisions. Cryptocurrencies are high risk and you should consult a financial professional before making any financial decisions. Make sure you do your own research. We may have a direct or indirect financial interest in content mentioned in this newsletter.