Overview of the report content

Recently, Pantera Capital released "The State of Tokenization Q1 2026." Based on tracking data from 593 tokenized assets across 11 asset classes, the report introduces the industry’s first systematic "Tokenization Progress Index" (TPI), posing a central question: As every major bank claims to have a tokenization strategy, how many are building genuine infrastructure, and how many are merely engaging in superficial branding—like putting newspaper articles online?

The article covers the following dimensions:

• Market Overview: Asset Composition, Geographic Distribution, and Platform Concentration of the $321.1 Billion Tokenized Market

• TPI 3D Assessment: Quantify the on-chain maturity of 542 assets based on issuance/redemption, transferability, and composability, categorizing them into three layers: Wrapper, Hybrid, and Native.

• Asset Class Differentiation: Analyze the divergent evolution of 11 categories, including stablecoins, government bonds, and private credit, with a focus on the structural paradox of private credit—high DeFi penetration but low TPI score.

• Institutional Roadmap: Outline a four-stage evolution path from "wrapped" to "native," illustrated by cases such as BlackRock’s BUIDL

• Final Judgment: Argue that the wrapper market represents regulatory equilibrium rather than a flaw, redefining success criteria—from whether assets are on-chain to whether they deliver the benefits blockchain was meant to provide.

Tokenization has completed the journey from 0 to 1 for asset on-chain, but there remains a long road ahead to achieve native on-chain finance. The next phase of competition will not belong to the most skilled marketers, but to builders who can redesign financial products and unlock the unique capabilities of blockchain.

Market Status: $321B Boom in the "Wrapping Layer"

The tokenized market in 2026 exhibited a typical "quantity over quality" expansion trend. A total of 593 assets across 11 asset classes reached a combined market capitalization of approximately $321.1 billion, nearly a 60% increase from around $200.6 billion in 2024. In 2025, 168 new assets were launched, representing a year-over-year increase of 115%. BlackRock’s BUIDL fund surpassed $2 billion in AUM, while Franklin Templeton’s FOBXX was tokenized as early as 2021—on the surface, institutional FOMO appears to be driving this frenzy.

But a metaphor reveals the truth: tokenization today is at the "newspaper on the web" stage. Just as the early internet merely copied print content onto web pages—keeping the same format but delivering it faster—most tokenized assets today are no different: they have a digital receipt on the blockchain, yet the core processes of issuance, redemption, custody, and settlement still rely heavily on off-chain intermediaries. The average TPI score across 542 rated assets is only 2.04 out of 5, meaning the entire market hasn’t even reached half of the passing threshold.

The asset hierarchy reveals a harsh reality:

• Wrapper (Wrapper Layer): Accounts for 77.6% (460 assets); tokens are digital representations of off-chain assets and do not possess authoritative ledger functionality on-chain.

• Hybrid: Accounts for 11.1% (66 assets), with some lifecycle stages on-chain, but critical functions still rely on off-chain processes.

• Native: Accounts for only 2.7% (16 assets), with assets designed from the outset to operate on-chain natively.

More than three-quarters of tokenized assets are still essentially "traditional securities with blockchain receipts," where tokens add a data layer without changing how the assets actually function.

TPI 3D Assessment: Issuance and redemption are the biggest bottlenecks

Pantera's TPI scoring system evaluates on-chain maturity across three independent dimensions, each rated 1 to 5, with the average taken:

• Issuance & Redemption — Can minting and exit be achieved through a self-directed, symmetric on-chain mechanism?
• Transferability & Settlement — Is the chain the authoritative settlement layer, or a mirror of an off-chain ledger?
• Complexity & Composability — Can assets "work" and combine yields on-chain through smart contracts?

Data reveals the actual gaps across each stage:

• Issuance and redemption are the weakest: 91.1% of assets (494 items) scored only 1–2 points; administrator-controlled minting and custodial intermediaries for redemption remain the norm; truly autonomous minting/burning models exist for only 13 items (2.4%).

• Slight improvement in transferability: 37.8% of assets (205 items) scored 3 points, indicating expansion of the intermediate state of dual-ledger coexistence; however, on-chain sovereign settlement (scores 4–5) applies to only 35 items (6.5%).

• Composability is most limited: 72.7% of assets (394 items) scored only 2 points, with the vast majority still being simple custodial products; only 21 items (3.9%) actively participate in complex multi-protocol and cross-chain operations.

Stablecoins are the sole exception, with a composite TPI of approximately 2.67, significantly above the market average. However, a deeper contradiction is worth noting: about $26.4 billion in stablecoins are locked in DeFi, yet their DeFi utilization rate is only 9.0%—most stablecoins continue to circulate as cash equivalents rather than productive DeFi assets. "Scale" does not equate to "utility."

Asset Class Differentiation: The DeFi Penetration Paradox in Private Credit

When shifting focus from overall data to the asset class level, a more complex picture of divergence emerges.

Stablecoins dominate the market with a chain-based value of $293.7 billion, accounting for 91.6% of the total. U.S. Treasuries follow closely, with a size of approximately $12 billion, driven by institutional demand for on-chain yields. Commodities have also risen to around $7.1 billion, but this growth partly reflects the 2025 gold bull market itself—tokenized gold products have appreciated alongside their underlying assets, rather than due solely to new assets being tokenized.

Private credit presents an interesting paradox: although its TPI score is not outstanding (a composite of approximately 1.82), it leads in DeFi utilization—64.3% of private credit’s market cap exists as active DeFi TVL, far exceeding the 19.0% for actively managed strategies and 9.0% for stablecoins.

The reason for this phenomenon is "centralization," not "popularization." Maple’s syrupUSDT and syrupUSDC together account for approximately two-thirds of the active DeFi TVL in this category. These products are interest-bearing instruments designed from inception to be accepted as collateral and to be leveraged across multiple layers of DeFi vaults. In other words, the composability of private credit is real—but limited to only a few protocols and products; the broader asset class has not yet achieved widespread on-chain integration.

In comparison, DeFi utilization for U.S. Treasuries and commodities stands at only 3.2% and 2.5%, respectively, while real estate and corporate bonds are nearly zero. This confirms the view that capital is increasingly favoring more structured designs, but the pace of scale expansion still outstrips on-chain maturity. The market is widening, but not yet deepening.

Institutional Entry Path: From Product Familiarization to Partnership Issuance

The growth trajectory of tokenized Treasuries best illustrates the logic behind institutional entry. Rising from near zero in 2021 to an estimated $12 billion by 2026, this expansion is not driven by long-tail experiments but is anchored in large, recognizable financial institutions. In addition to Ondo Finance’s USDY and OUSG products, which together have a market capitalization exceeding $2 billion, the largest tokenized Treasury products include BlackRock’s BUIDL (approximately $2.1 billion, issued via Securitize), Franklin Templeton’s FOBXX/BENJI (approximately $1 billion), Janus Henderson/Anemoy (approximately $1 billion, issued via Centrifuge), WisdomTree’s WTGXX (approximately $752 million), and Fidelity’s FDIT (approximately $162 million).

This model indicates that tokenized government bonds have become the most clearly defined "beachhead" for institutions in the tokenization space: mainstream financial firms are willing to bring familiar short-term dollar products on-chain, even as deeper native functionalities have yet to fully emerge. Rather than entering tokenization through entirely native on-chain financial structures, they are leveraging familiar products and relying on specialized issuance partners such as Securitize, Centrifuge, and Libeara to bring these products on-chain.

This "institutional issuer partner" model is expanding beyond government bonds. In private credit, Apollo appears in the dataset through the Apollo Diversified Credit Securitization Fund (approximately $1.31 billion); in the stablecoin space, EURCV, launched by Société Générale’s FORGE, is an early example of a tokenized cash product initiated by a major bank. Geographically, the BVI dominates with $191.5 billion (of which $185 billion is driven by USDT relocated to El Salvador in 2025), followed by Bermuda ($76.1 billion, 24%) and the United States ($23.6 billion, 7%). Notably, the average composite TPI for U.S.-registered assets is 2.0, while BVI/Liechtenstein assets (mostly Reg S issuances) cluster in lower score ranges—highlighting a significant correlation between regulatory environments and tokenization pathways.

Tokenization Four-Stage Roadmap

Pantera maps the TPI framework into four evolutionary stages to provide institutions with a clear product roadmap:

Phase One: Wrapping (TPI 1-2)

Established on-chain but lacking on-chain utility. Tokens serve as digital receipts, with their lifecycle dependent on off-chain infrastructure. 88% of rated assets remain in this stage. The risk is not in failing to advance, but in remaining here permanently.

Phase Two: Connect (TPI 2-3)

The critical juncture of strategic differentiation. Institutions must choose: optimize for cost savings or build for new growth. The cost path treats the dual-ledger system as an internal efficiency initiative; the growth path views oracle integration, smart contract governance, and relaxed on-chain transfer restrictions as a platform layer for accessing new markets.

Stage Three: Compose (TPI 3-4)

Composability is the threshold for an asset to become a "financial building block." It can be deposited as collateral into on-chain lending protocols, allocated to risk management vaults, and integrated into structured product portfolios for yield. Currently, only 12% of the market has reached this stage.

Stage 4: Originate (TPI 4-5)

Transition from off-chain assets to on-chain native design. Issuance, redemption, custody, settlement, and governance are on-chain primitives from day one. Permissionless minting and burning, on-chain sovereign ledger, autonomous risk engine. Currently, only DeFi-native protocols such as MakerDAO’s USDS and Aave’s GHO fully occupy this tier.

Using BlackRock’s BUIDL as an example, the current version represents tokenized shares of an off-chain money market fund, with administration minting, T+1 redemptions, and whitelist-based transfers—Phase One packaging. Future evolution includes: Phase Two, relaxing transfer restrictions; Phase Three, granting Morpho collateral eligibility and real-time oracle pricing; Phase Four, eliminating the off-chain ledger entirely, accruing interest per block, and enabling programmatic portfolio rebalancing based on the yield curve.

Key Insights and Summary

The core judgment of this report is that tokenization should not be evaluated based on whether an asset is on-chain, but rather on whether it has genuinely delivered the benefits that blockchain infrastructure is designed to provide. The industry has successfully demonstrated that assets can be represented on-chain, but it has not yet proven that such representation fundamentally changes how assets operate.

The next stage of maturity will be defined by utility metrics: settlement speed, percentage of transfer costs, number of on-chain wallet holders, daily trading volume, and actively deployed value in DeFi. Institutions that invest in the depth of real infrastructure—self-issued assets, on-chain ledgers, and protocol-level composability—will build the moat for the next wave of genuine utility and demand.

Several key signals deserve attention from participants in the Web3 ecosystem:

• The "Leading Trap" of Stablecoins: High market cap and TPI, but DeFi utilization remains at only 9%—"circulation" does not equal "productivity"

• Centralized composability in private credit: DeFi penetration reaches 64.3%, but reliance on a few protocols like Maple persists, and category-wide integration has not yet become widespread.

• Gradualism in institutional pathways: Mainstream financial firms enter through familiar products and specialized distribution partners, rather than adopting native designs outright.

• The symbiotic relationship between regulation and architecture: SEC-regulated products favor packaged models, while native DeFi protocols drive higher TPI in more permissive jurisdictions; 91% of asset issuance remains gated—not due to backwardness, but as a rational outcome of the current regulatory equilibrium.

The most valuable use cases require redesign, not replication. The prevalence of wrapper markets is not a flaw, but a "regulatory equilibrium"—as long as regulations assume intermediary gatekeeping workflows, even the most complex institutions will continue producing first-layer wrappers. Infrastructure bottlenecks and regulatory bottlenecks are expressions of the same constraint at different layers of the stack.

The next chapter of tokenization does not belong to those best at simply moving assets onto websites, but to builders who leverage blockchain’s unique capabilities—programmability, atomic settlement, continuous markets, and shared state—to redesign financial products. Just as the internet did not remain in the era of “newspaper websites,” tokenization will not stop at “traditional assets with blockchain receipts.” What’s needed for this leap is not more capital, but a fundamental rethinking of how assets truly work on-chain.