What Is Tokenization? How Real Assets Move onto a Blockchain

You may have read that gold can now be bought as a token, or seen a crypto app selling slices of US company shares. Both rely on the same idea: tokenization. It sounds technical, but the concept is fairly simple. Tokenization is the process of creating a digital representation of an asset as a token on a blockchain, so that rights to the asset can be recorded, split up, and transferred digitally. The asset can be gold, bonds, fund units, property, or even mone

The topic comes up more and more in Indonesia because the Financial Services Authority (OJK) is preparing dedicated rules for offering tokenized assets. Before those rules arrive and more products reach the market, it helps to understand what you are actually buying when you buy a token.

What is tokenization?

Tokenization is the process of generating and recording a digital representation of an asset on a programmable platform, which in practice almost always means a blockchain. The Bank for International Settlements (BIS) uses a similar definition in its 2024 report to the G20. The result is called a token. Each token stands for one unit of rights to the asset, such as one gram of gold, one fund unit, or a small share of a building.

Imagine you leave a gold bar with a trusted storage company. As proof, the company gives you a receipt. You can sell that receipt to someone else, and the buyer then has the right to collect the gold. Tokenization follows similar logic. The difference is that the receipt is a token on a blockchain, so it can be split into small pieces and sent to anyone within minutes.

Two points that beginners often miss:

• The underlying asset stays in the real world. The gold stays in the vault, and the bonds stay recorded with a custodian. What moves on the blockchain is proof of the right to them.
• A token is only worth what stands behind it. A gold token holds its value only as long as the gold really exists and the issuer is willing and able to redeem it.

Physical or financial assets that become the subject of tokenization are usually called real-world assets (RWA). Tokenization is the process, and RWA is the asset. The next article in this series covers RWA in detail.

What assets can be tokenized?

Technically, almost any asset with value and proof of ownership can be tokenized. In practice, the categories with the most activity so far are:

• Government bonds and money market funds. This category is dominated by large institutions because the assets are liquid and their value is relatively stable.
• Gold and other commodities. One token usually represents a set weight of gold held in a vault.
• Shares. Tokens that track a company’s share price, often sold in small fractions.
• Credit and receivables. Corporate loans, trade invoices, or other financing packaged as tokens.
• Property. Rights to a building, or to its rental income, split across many tokens.
• Money. Fiat-backed stablecoins bring the value of currency held in reserves into token form. The data platform RWA.xyz tracks stablecoins as a separate category from other real-world assets.

Being technically possible does not make it legally allowed. Which assets may be tokenized and offered to the public is decided by each country’s regulations. In Indonesia, OJK is still drafting the dedicated rules.

How tokenization works

Issuing the token itself is the easy part. Whether a token deserves trust depends far more on the legal and operational work around it. The general flow looks like this:

1. Define the asset and its legal structure. The issuer decides which asset to tokenize and what rights come with the token. Does the holder own the asset directly, have a right only to its income, or hold a claim against the issuer? The answer determines what you can demand if something goes wrong.
2. Place the asset with a trusted custodian. The asset is held by a custodian, such as a custodian bank or a vault operator. Ideally it is kept separate from the issuer’s own property, so it is not dragged in if the issuer goes bankrupt.
3. Issue tokens through a smart contract. A smart contract creates (mints) tokens matching the amount of assets held. The same program sets the rules, for example allowing only identity-verified wallets to hold the token.
4. Distribute and trade the tokens. Tokens are offered to investors and can then change hands on approved platforms. Every transfer is recorded on the blockchain.
5. Report, pay out income, and redeem. The issuer reports on the asset regularly. Income such as interest or rent can be paid to token holders automatically. When a holder wants to exit, the token is exchanged back (redemption) and then destroyed (burning).

This flow is close to how a fiat-backed stablecoin works, which also rests on reserves, minting, and burning. The details are in How a Rupiah Stablecoin Works: Peg, Backing, and Minting.

Uses and benefits of tokenization

What makes tokenization attractive is the way assets are recorded and moved. The benefits most often cited include:

• Fractional ownership. A high-value asset can be split into small units. Someone who cannot afford a whole gold bar or a whole property unit can own a small piece of it.
• Faster transfers. Tokens can be sent at any time, including outside exchange hours and banking days. Settlement can happen within minutes.
• Records you can check. The number of tokens in circulation and their transfer history are recorded on the blockchain. On a public network, anyone can look them up.
• Programmable rules. Interest payments, limits on who may buy, or maturity dates can be written directly into the smart contract.
• Asset and payment on the same rails. When both the asset and the means of payment are tokens on the same network, they can move at the same time. The seller does not have to worry about delivering the asset while the money never arrives. In financial markets, this is known as delivery versus payment (DvP).
• Wider access. Products once available only to institutions could be opened to a broader range of investors, within the limits of the rules.

All of these benefits are still potential. The 2024 BIS report says tokenization could lower transaction costs, but that the gains depend on sound governance and risk management.

Real examples of tokenization

Tokenization is already in use in global financial markets, and some of the participants are large asset managers.

Franklin Templeton (BENJI). In 2021, Franklin Templeton launched the Franklin OnChain U.S. Government Money Fund, a money market fund that invests in US government securities. It became the first US-registered fund to use a public blockchain, Stellar, to process transactions and record share ownership. One share of the fund is represented by one BENJI token.

BlackRock (BUIDL). In March 2024, BlackRock launched the BlackRock USD Institutional Digital Liquidity Fund on the Ethereum network, with Securitize as its tokenization platform. The initial minimum investment is US$5 million, and the fund is open only to qualified investors. This example shows that a tokenized product is not automatically open to retail investors.

PAX Gold (PAXG). Each PAXG token issued by Paxos represents one fine troy ounce of gold from a London Good Delivery bar, held in LBMA-accredited vaults in London. Holders can redeem their tokens with Paxos. Gold tokens like this are among the largest in the commodities category on RWA.xyz.

In Indonesia. In a July 2026 press release, OJK said it had graduated several providers from its regulatory sandbox with business models including gold tokenization, tokenization of government bonds (Surat Utang Negara) through fund management contracts, and tokenization of property ownership benefits. The same list includes Rupiah stablecoin issuance. Dedicated rules for offering tokenized assets are still being drafted, so domestic products will keep developing as the rules take shape.

As for market size, RWA.xyz data as of 7 October 2026 puts the value of real-world assets tokenized and circulating on blockchains, excluding stablecoins, at around US$39 billion, held by more than 5 million holders. For comparison, the total value of stablecoins on the same platform is around US$296 billion. These figures change daily, so check the latest numbers at the source.

Tokenized assets vs crypto assets vs conventional assets

A gold token and Bitcoin are both recorded on a blockchain, but their value comes from completely different places. The table below compares three kinds of assets that are often confused.

Aspect	Conventional Asset (e.g. shares in a brokerage account)	Tokenized Asset (e.g. a gold token)	Native Crypto Asset (e.g. Bitcoin)
Source of value	The company or underlying asset	A real asset held by a custodian	Market supply and demand
Where it is recorded	A central depository and settlement system	A blockchain, while the underlying asset sits off-chain	A blockchain
Transfer hours	Exchange hours and business days	Can be 24/7, depending on the issuer’s rules	24/7
Who you need to trust	The exchange, broker, and custodian	The issuer and the asset custodian	The network and its protocol code
Main risks	Market risk and company risk	Asset risk plus issuer, custodian, and smart contract risk	Price volatility and technology risk

Digitization and tokenization are another pair that gets mixed up. In Indonesia, shares and government bonds have long been bought online and recorded electronically. The difference is that those records sit in closed systems run by specific institutions. With tokenization, the ownership record lives on a programmable blockchain, and on a public network anyone can inspect it.

Tokenization risks to understand

A token that represents a real asset carries two layers of risk at once: the risk of the asset itself, and the risk that comes from the tokenization process.

1. Legal risk. Does holding the token actually give you a legal right to the asset? That depends on the structure the issuer chose and on the law where the asset sits. The BIS report names legal uncertainty as one of the risks of tokenization, especially where it is unclear how existing rules apply to tokens.

2. Issuer and custodian risk. If the issuer is mismanaged, goes bankrupt, or turns out not to hold the assets it claims, the token can lose its value. That is why the assets should be held separately by an independent custodian and checked by a third party on a regular basis.

3. Smart contract risk. Flaws in the program code can be exploited by attackers. A security audit reduces this risk but does not remove it.

4. Liquidity risk. Easy to transfer does not mean easy to sell. If there are few buyers, you may struggle to sell the token at a fair price, especially for assets like property.

5. Data and oracle risk. Prices and asset data from the real world reach the blockchain through oracles. Wrong or delayed data leads the smart contract to make the wrong decision.

6. Fraud risk. Anyone can create a token called “gold” or “property”. Without a real asset and an identifiable issuer, such a token is worth nothing.

Before buying a token that claims to represent a real asset, look for answers to these questions:

• Who is the issuer, and is the token offered through a provider licensed by OJK?
• Where is the underlying asset held, and who is the custodian?
• Are there regular reports or attestations from an independent party?
• What rights do you get as a token holder, and can the token be redeemed for the asset?
• How easy is it to sell the token again?

A similar assessment framework for stablecoins is covered in Stablecoin Risks and How to Assess Them.

Tokenization and regulation in Indonesia

In Indonesia, tokenization falls within the digital financial asset framework supervised by OJK. The rules come in layers.

The law. Law Number 4 of 2026, which amends the Law on Financial Sector Development and Strengthening (UU P2SK), brings activities related to digital financial assets within the scope of financial sector technology innovation (ITSK). The Elucidation of Article 213 paragraph (1) letter h lists “aktivitas tokenisasi” (tokenization activities, unofficial translation) as one of these activities, alongside initial offerings of digital financial assets and staking. Further provisions are delegated to OJK and Bank Indonesia regulations.

OJK regulations already in force. OJK Regulation (POJK) Number 27 of 2024 on the Trading of Digital Financial Assets Including Crypto Assets, as amended by POJK Number 23 of 2025, divides digital financial assets into crypto assets and other digital financial assets. Assets that are traded must meet certain criteria, including being issued, stored, transferred, or traded using distributed ledger technology such as a blockchain. Providers may also trade only assets on the list set by the exchange.

Dedicated rules still being drafted. OJK is drafting a regulation on offerings of digital financial assets, including offerings of tokenized assets. The draft released for public comment defines a tokenized asset as a digital financial asset that represents an asset in digital form through tokenization. According to OJK, the rules will cover which assets may be tokenized, how offerings are conducted, licensing, consumer protection, and record-keeping and reporting by token issuers. In June 2026, OJK targeted issuing the rules by the third quarter of 2026 at the latest. As of early October 2026 they are still in draft form, so the final content may differ from the draft.

Regulatory sandbox. While the dedicated rules are pending, OJK tests tokenization business models in its regulatory sandbox. Graduating from the sandbox is not the same as holding a business license, so you still need to check the licensing status of the issuer or provider.

For you as a user, the rule of thumb is simple: only transact in digital financial assets through OJK-licensed providers, and check their licensing status on OJK’s official website.

Tokenization and Rupiah stablecoins

Tokenized assets still need something to pay for them with. If bond tokens or gold tokens trade on a blockchain, the buyer needs something that can be sent back to the seller on the same network. In global markets, US dollar stablecoins fill much of this role. The BIS report also names the choice of settlement asset as a key consideration for central banks in tokenized systems.

For Indonesian assets priced in Rupiah, using a dollar stablecoin means a currency conversion in every transaction. A Rupiah stablecoin offers an alternative: Rupiah value in token form that can move on the same network as the tokenized asset. The full case for why Indonesia needs a Rupiah stablecoin is in Why Does Indonesia Need a Rupiah Stablecoin?.

IDRX is a Rupiah-based stablecoin pegged 1:1 to the Rupiah and backed by fiat reserves and government securities. Its transparency and audit documents are available on the IDRX documents page. Using a stablecoin as a means of transaction in Indonesia remains subject to the rules in force. The Elucidation of the amended UU P2SK states that a stablecoin used as a means of transaction (alat transaksi) requires a recommendation from the exchange and OJK approval, and that such use is not treated as a means of payment (alat pembayaran). To learn more about IDRX, read Introducing IDRX: The Rupiah Stablecoin from Indonesia.

Conclusion

Tokenization changes how rights to an asset are recorded and moved. The asset stays in the real world, while proof of ownership moves onto a blockchain as a token. That opens up benefits such as fractional ownership, faster transfers, records you can check, and programmable rules. Large asset managers already use it for money market funds and government bonds, while gold tokens are the easiest example to grasp.

A token is still only worth what stands behind it. The token’s legal status, the existence of the asset, the credibility of the issuer and custodian, the security of the code, and the liquidity of its market all need checking before you trust a token. In Indonesia, the dedicated rules are still in draft, so stick to licensed providers and keep an eye on how the rules develop.

Once you understand the process, the next step is to understand the assets. The next article in this series covers real-world assets (RWA), the kinds of real assets most often tokenized, and how to assess them.

FAQ

What is tokenization in short? Tokenization is the process of creating a digital representation of an asset as a token on a blockchain, so that rights to the asset can be recorded, split up, and transferred digitally.

What is the difference between tokenization and RWA? Tokenization is the process. RWA (real-world assets) are the assets, such as gold, bonds, or property, that become the subject of tokenization.

Does holding a token mean owning the underlying asset? Not necessarily. It depends on the legal structure the issuer uses. Some tokens give direct ownership, some give a right only to the asset’s income, and some are a claim against the issuer. Check the offering documents before you buy.

What assets can be tokenized? Technically, almost any asset of value, such as government bonds, funds, gold, shares, credit, property, and money. Whether an asset may be offered to the public is decided by each country’s regulations.

Is tokenization legal in Indonesia? Tokenization activities fall within the scope of financial sector technology innovation related to digital financial assets, which OJK supervises. Dedicated rules for offering tokenized assets are still being drafted, so make sure you only transact through OJK-licensed providers.

Are tokenized assets always safe? No. Besides the price risk of the asset itself, there is issuer, custodian, smart contract, liquidity, and legal risk. Tokenization changes how an asset is recorded, but it does not remove the risk.

Is a stablecoin a form of tokenization? Conceptually, yes. A fiat-backed stablecoin brings the value of currency held in reserves into token form, and the BIS report discusses the tokenization of money and other assets within a single framework. Legally in Indonesia, stablecoins are generally classed as crypto assets, so they may be treated differently from tokenized assets.

References

1. Law of the Republic of Indonesia Number 4 of 2026 on the Amendment to Law Number 4 of 2023 on Financial Sector Development and Strengthening, and its Elucidation [in Indonesian]. https://peraturan.go.id
2. Otoritas Jasa Keuangan. (2024). Siaran Pers: OJK Terbitkan Aturan Penyelenggaraan Perdagangan Aset Keuangan Digital Termasuk Aset Kripto (POJK 27/2024) [in Indonesian]. https://ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/POJK-27-Tahun-2024-Penyelenggaraan-Perdagangan-Aset-Keuangan-Digital-Termasuk-Aset-Kripto-AKD-AK.aspx
3. Otoritas Jasa Keuangan. (4 December 2025). Siaran Pers: OJK Terbitkan Aturan Baru Perkuat Pengaturan Perdagangan Aset Keuangan Digital dan Derivatif Kripto (POJK 23/2025) [in Indonesian]. https://ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/POJK-23-Tahun-2025-Perubahan-POJK-27-Tahun-2024-Penyelenggaraan-Perdagangan-Aset-Keuangan-Digital-Termasuk-Aset-Kripto.aspx
4. Otoritas Jasa Keuangan. Rancangan Peraturan OJK tentang Penawaran Aset Keuangan Digital (draft for public comment) [in Indonesian]. https://www.ojk.go.id/id/regulasi/otoritas-jasa-keuangan/rancangan-regulasi/Documents/Draft%20Permintaan%20Tanggapan%20Tertulis_RPOJK%20Penawaran%20Aset%20Keuangan%20Digital.docx
5. Bank for International Settlements & Committee on Payments and Market Infrastructures. (2024). Tokenisation in the context of money and other assets: concepts and implications for central banks. Report to the G20. https://www.bis.org/cpmi/publ/d225.htm
6. BlackRock & Securitize. (March 2024). BlackRock Launches Its First Tokenized Fund, BUIDL, on the Ethereum Network. Business Wire. https://www.nasdaq.com/press-release/blackrock-launches-its-first-tokenized-fund-buidl-on-the-ethereum-network-2024-03-20
7. Stellar Development Foundation. (2021). Franklin Templeton Announces the Franklin OnChain U.S. Government Money Fund Surpasses $270 Million in Assets Under Management. https://stellar.org/press/franklin-templeton-announces-the-franklin-onchain-u-s-government-money-fund-surpasses-270-million-in-assets-under-management
8. Paxos. PAX Gold (PAXG). Paxos Documentation. https://docs.paxos.com/guides/stablecoin/paxg
9. RWA.xyz. Analytics on Tokenized Real-World Assets. Accessed 7 October 2026. https://app.rwa.xyz/
10. Kontan. (8 June 2026). OJK Targetkan Aturan Tokenisasi Aset Nyata Terbit pada Kuartal III-2026 [in Indonesian]. https://investasi.kontan.co.id/news/ojk-targetkan-aturan-tokenisasi-aset-nyata-terbit-pada-kuartal-iii-2026
11. Otoritas Jasa Keuangan. (28 July 2026). Siaran Pers SP 145/DKPU/OJK/VII/2026: OJK Dorong Pengembangan Potensi UMKM Wilayah Timur Melalui Digitalisasi Keuangan [in Indonesian]. https://ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/OJK-Dorong-Pengembangan-Potensi-UMKM-Wilayah-Timur-Melalui-Digitalisasi-Keuangan.aspx
12. IDRX. Transparency and Audit Documents. https://idrx.co/en/docs/

Disclaimer

This article is educational content and not an invitation to invest or transact. Crypto assets and tokenized assets carry risk, including the risk of losing value. Do your own research (DYOR) before making any decision.