A short history of tokenization, 2017 to 2026

How assets change hands without a blockchain

A security is a financial instrument that gives its holder a right to money or ownership, such as a share, a bond or a fund unit. For decades almost none of them have existed on paper. Book-entry ownership means your security is an entry in a ledger kept by a regulated firm, and moving it means changing two entries.

In the United States that ledger sits in layers. At the bottom sits the depository. A central securities depository (CSD) is the institution that holds securities in one place so they never need to move physically. The US one is the Depository Trust Company, or DTC. It holds substantially all publicly traded US shares and bonds, registered in the name of its nominee, Cede & Co. Your broker has an account at DTC, and you have an account at your broker. Legally you are the beneficial owner and Cede & Co is the name on the issuer's register.

That register belongs to the issuer and is kept by a transfer agent, the licensed firm that records who owns the shares and processes payouts. Funds add one more firm. A custodian is a bank that holds the fund's assets apart from its own. Each of these firms keeps its own books, and they reconcile with each other every day.

Settlement is the moment a trade becomes final: the buyer has the security and the seller has the cash. On 28 May 2024 the US standard cycle shortened from two business days after the trade, called T+2, to one, called T+1. The delay exists because several ledgers have to agree before ownership changes.

This layered system is slow but it works, and it handles trillions of dollars a day. Every wave of tokenization promised to replace part of it. The history below is largely the story of which part could actually be replaced.

Wave one, 2017 to 2021: security tokens that nobody traded

The first wave grew out of the 2017 boom in initial coin offerings. ICOs were token sales that raised money with no basis in securities law. As regulators moved against them, the industry offered a compliant version. A security token offering (STO) sold a token that was legally a security, a share or a bond, under the normal rules for private placements. Blockchain Capital's BCAP, sold in April 2017, is the first one on record.

The pitch was liquidity. Illiquid assets such as a building or a stake in a private company would become tradable, because a token can move anywhere at any hour. The capital did come, on a small scale: the best year, 2019, raised about 452 mn USD across 55 offerings, according to PwC data cited by LCX.

The trading never came. Secondary trading is buying and selling between investors after an offering closes, which was the whole promise. Across every security token in the world, it came to about 2.4 mn USD in all of 2019, roughly 7,000 USD a day, according to Security Token Market's annual data.

The law explains most of it. Most STOs used Regulation D, the US exemption for private placements. Restricted securities, which is what such a placement creates, can only be resold to other qualified investors. The largest offering of the wave, tZERO, raised 134 mn USD in 2018, minted the tokens into its own wallet and locked them for 90 days. After that, holders could trade only on an ATS and only with other accredited investors. An ATS, or alternative trading system, is a venue registered with the SEC for trading securities away from an exchange. The token kept every restriction of a private deal and added the cost of a blockchain.

The bull market did not fix it. In March 2021, near the top of the cycle, the entire real estate category of security tokens traded about 78,000 USD in the month, according to research by Philipp Sandner.

The cleanest failure had nothing to do with trading at all. Harbor tokenized a student housing block in South Carolina, the Hub at Columbia, as 955 tokens of 21,000 USD each. On 11 April 2019 the deal collapsed because the building's mortgage lender refused to approve the change in ownership. The weak link sat in the legal chain above the token, where no smart contract could reach it.

The lesson: a token does not create buyers. Where the asset's natural owners are off-chain and restricted by law, putting the asset on a chain changes nothing about who can buy it.

Wave two, 2020 to 2022: DeFi lends to the real world

The second wave ran the other way. Instead of bringing traditional investors to a blockchain, it brought real-world borrowers to investors who were already there: DeFi protocols with large stablecoin balances earning little. MakerDAO, the issuer of the DAI stablecoin, began accepting off-chain assets as collateral, and lending protocols began funding companies in the traditional economy.

The demand was there. The lending model was flawed. Maple Finance lent to trading firms on reputation, with nothing pledged against the loans. When the FTX exchange collapsed in November 2022, lenders on Maple took about 54 mn USD of bad debt, most of it from a single borrower, Orthogonal Trading, which had hidden its exposure to FTX.

Maple survived by changing its model. Since May 2024 it has required overcollateralization, meaning borrowers pledge assets worth at least 150% of the loan so the lender can sell the collateral if prices fall. Goldfinch, which kept lending without collateral to businesses in emerging markets, saw about 18% of its loan volume default and voted to wind down in June 2026, with about 56 mn USD of principal unpaid, according to research by Spark.

The lesson: on-chain credit works only with the old rules of credit. Everything that functions in tokenized private credit in 2026 has collateral, a vetted list of borrowers and an outside party valuing the loans. Chapter 8 follows that rule into today's lending markets.

Wave three, 2023 to 2024: Treasuries find a buyer already on-chain

The third wave is the one that worked. Its product was the tokenized Treasury fund: a fund that holds US Treasury bills, short loans to the US government, with its shares issued as tokens.

The usual explanation is that Treasury bills are simple. They are. Every bill of the same maturity is identical, the price is public, and there is no building to maintain or borrower to chase. But simplicity does not explain the timing, because bills were just as simple in 2019.

The timing came from the buyer. In 2023 the US federal funds rate, the benchmark interest rate set by the Federal Reserve, passed 5%. Meanwhile tens of billions of dollars of stablecoins sat on public blockchains earning nothing. DAO treasuries, market makers and exchanges held dollars on-chain and had no way to earn the going rate without leaving for a bank. In January 2023 MakerDAO put 500 mn USD into short-term Treasuries, showing that a protocol could hold government debt at scale.

Products followed quickly. Franklin Templeton had quietly launched FOBXX on the Stellar blockchain in April 2021, the first US-registered fund to put its share records on a public chain. Ondo launched OUSG in January 2023, and BlackRock launched BUIDL on 20 March 2024 with Securitize as its transfer agent. The category passed 10 bn USD on 11 February 2026, according to CoinGecko.

The lesson: tokenization wins when the buyer is already on-chain and has a problem the token solves. Here the problem was earning a government-bond yield on dollars that had to stay on a blockchain. Tokenized real estate, the asset wave one started with, stood at about 457 mn USD in July 2026 and was shrinking, according to BeInCrypto Research.

Wave four, 2024 to 2026: institutions put their own ledgers on-chain

The fourth wave sells something different. Its main product is cheaper operations for institutions that move their existing books onto a blockchain or a similar shared ledger, not a new market for investors.

That shows in how the market is measured. Chapter 1 introduced the split between distributed assets, which investors can hold in their own wallets and move, and represented assets, which only record positions on a chain. In March 2026 distributed value was about 26.7 bn USD, according to insights4vc, while represented value was many times larger. Headlines described a booming tokenization market. The growth was in ledgers no outside investor could use.

The products of this wave also bolt tokens onto existing structures. A feeder fund collects money from investors and passes it into a larger master fund that does the investing. Apollo's tokenized credit fund, ACRED, launched in January 2025, tokenizes the feeder and leaves the master fund untouched. Regulators took the same view. On 28 January 2026 the SEC stated that a tokenized security is the same security under existing law, and in December 2025 SEC staff allowed DTC to run a three-year pilot that turns traditional holdings into tokens.

The investable part did grow. Distributed value rose from roughly 5 to 6 bn USD at the start of 2025 to about 39 bn USD on 10 September 2026, according to RWA.xyz, most of it tokenized Treasuries, gold and credit. That is real growth, about a tenth the size of the figure that reaches headlines.

The lesson: a bigger number on a dashboard is not a bigger market. Ask whether an outside investor can hold and move the asset before treating growth as adoption.

The rule behind all four waves

Put the waves side by side and one variable sorts them. Wave one tokenized buildings and private company stakes for investors who were off-chain and legally boxed in. Wave two found an on-chain buyer and lost money on loans with no collateral. Wave three matched an on-chain buyer with the simplest asset available. Wave four moved institutional records onto ledgers, which produced the biggest numbers and the smallest open market.

Tokenization has connected to demand that already existed. Where demand had to be created first, it lost.

What to watch next

• DTC's tokenization service: commercial launch was planned for late 2026. If it runs at scale, mainstream US securities get an official token form inside the existing settlement system, which would make wave four matter to ordinary investors.
• Interest rates: tokenized Treasuries grew when rates passed 5%. If Fed cuts push their yield well below 3%, the on-chain buyer's reason to hold them weakens.
• US market-structure law: the CLARITY Act, which would set rules for trading crypto assets, was still stalled in the Senate in September 2026. Its fate decides how freely tokenized securities can trade.
• Credit discipline: watch whether new private-credit tokens keep collateral, vetted borrowers and outside valuation, the conditions wave two paid to learn.
• Distributed against represented growth: if distributed value keeps rising while the represented headline swings, adoption is real. If only the headline moves, it is bookkeeping.