Institutional adoption is being cited as the key driver behind the rapid growth of the tokenized real-world asset (RWA) market, according to a senior Kucoin executive. The recently passed GENIUS Act is believed by the executive to be able to double the RWA market cap to $50 billion by year-end.
The Institutional Push: Why Big Players Are Driving Crypto’s Growth
Institutional adoption is being cited as the most critical factor driving the growth of the tokenized real-world asset (RWA) market, according to Tika Lum, head of global business development for VIP and institutional clients at Kucoin. It is explained by him that while the RWA concept is not new, a recent surge in discussion is directly linked to institutions, which are acting as catalysts for expansion.
It is argued by Lum that substantial capital, expertise, and credibility are brought by institutions. These factors, in turn, accelerate two other key drivers: the expansion of asset classes and improved blockchain efficiency. It is asserted by him that when major players like UBS or Blackrock enter the market, the sector is validated, and a virtuous cycle of growth is created.
To support this assessment, Kucoin’s firsthand experience is cited by Lum, with a partnership with UBS Asset Management being highlighted. In this partnership, UBS’s tokenized product, uMINT, was recognized by the exchange as trading collateral. This initiative, he says, positions Kucoin as a pioneer in which real-world assets are being brought into real-world applications.
Regulations Fueling Growth
The recently passed GENIUS Act is also believed by Lum to be a “game-changer for stablecoins and by extension, RWAs.” Under the legislation, a federal framework for stablecoin issuance will be established to determine eligibility and to regulate who can or cannot issue them. The framework’s aim is also to have state and federal regulations aligned to reduce fragmentation.
“Since stablecoins are considered to be the backbone of RWA liquidity—enabling seamless on-ramping, collateralization, and yield generation—a significant impact on market expansion and adoption is anticipated,” Lum explained.
It is added by him that the GENIUS Act, which minimizes regulatory risks while innovation in low-cost transactions is being encouraged, could accelerate RWA market growth from its current market capitalization of $24 billion to $50 billion by year-end. In order to prepare for this, institutional-grade infrastructure is being built by Kucoin, and regulatory changes are being embraced, Lum says.
The European Union’s Markets in Crypto-Assets (MiCA) regulation, which is set to be fully implemented by 2025, is also viewed by Lum as a critical regulatory development. The adoption of RWAs is expected to be further driven alongside Singapore’s CRS 2.0 enhancements and Hong Kong’s SFC guidelines on tokenized funds.
A New Chapter for Kucoin: The Power of Strategic Alliances
Even before the passage of the GENIUS Act, steps had already been taken by Kucoin to have institutional clients attracted to the tokenized RWA market. In November 2024, a partnership was formed by the exchange with DigiFT, which allowed institutional token holders on the DigiFT platform to have their UBS uMINT tokens used as off-exchange collateral on Kucoin.
The collaboration enables both companies to have a growing demand for high-grade onchain income assets addressed while regulatory compliance is ensured. When detailing the benefits for Kucoin users, it is stated by Lum that:
“For native crypto traders, this means enhanced liquidity—uMINT can earn yields while serving as collateral, reducing opportunity costs; greater accessibility to institutional products without leaving the crypto ecosystem; and diversified portfolios with real-world yields, all while enjoying KuCoin’s secure, user-friendly trading environment.”
Meanwhile, it is argued by Lum that barriers are lowered for institutions to use tokenized assets in real-time trading due to Kucoin’s acceptance of uMINT as trading collateral. This is said to have demonstrated the “viability of RWAs for yield generation and liquidity management.” Since support for UBS uMINT was announced, positive feedback and collaboration requests have been received by the exchange from large traditional asset management firms.
From Risk to Resilience: How to Build a Stronger System
While the cryptocurrency industry’s growth has been significantly boosted by tokenized RWAs through the injection of stability and institutional capital, potential systemic risks are also introduced by them. The industry and regulators must work together to have these risks mitigated. The underlying lack of liquidity is identified by Lum as one such risk.
A warning has been given by Lum that for immature RWA use cases, liquidity mismatches could occur. This is a situation where redemption pressures are faced by tokenized assets that outpace underlying asset liquidity, which could potentially lead to market freezes or fire sales.
It is also cautioned by him that the interconnectedness between digital assets and traditional finance could have contagion amplified. Other concerns that are being cited include regulatory arbitrage, which could lead to unchecked fraud or money laundering, and concentration risks if dominant platforms fail.
To have these risks mitigated, it is stated by Lum that robust smart contract audits, diversified oracles, and onchain stress testing must be prioritized by the digital asset industry. In turn, harmonized global standards should be enforced by regulators. These standards would include enhanced know-your-customer (KYC) and anti-money laundering (AML) protocols, as well as capital reserve requirements for issuers.
Looking ahead, it is projected by Lum that the market capitalization of the tokenized RWA sector will be reached to trillions of dollars within a few years. While institutions are expected to have dominance, regulatory clarity is seen as the key to having more retail users attracted.
It is said by Lum that regulatory clarity will have emerging markets unlocked. Additionally, retail users will be attracted by innovations such as yield-bearing stablecoins.
