Today, tokenization is becoming a critical component of financial market development. Institutions converting real-world assets into tokens on public blockchains can enhance the efficiency, transparency, and accessibility of value transfer systems.

Across the U.S., financial institutions, infrastructure providers, and policymakers are actively exploring how to integrate tokenized assets into the broader market system. The underlying technology of tokenization is also being used to support stablecoins, tokenized Treasuries, funds, and other financial instruments. The next step is to establish a corresponding regulatory environment to advance this transformation.

Three Major Challenges Facing the U.S. in Tokenization

Challenge 1: How Should Tokenized Assets Be Classified?

The biggest regulatory uncertainty in tokenization is the lack of a unified legal classification standard. U.S. law currently lacks a consistent framework for categorizing digital assets. As a result, tokenized assets are often classified on a case-by-case basis without uniform criteria. For example, fiat-backed stablecoins may be classified as payment tools, stores of value, securities, funds, or bank deposits. The specific classification depends on the stablecoin’s structure and who is evaluating it. Many issuers deliberately avoid paying interest or offering yield features to prevent being classified as securities.

Tokenized Treasury products face similar challenges. While U.S. Treasuries do not require registration with the SEC, packaging them into tokenized products may trigger the Investment Company Act. In other cases, yield generation or fractionalization could prompt regulators to treat tokens as securities. Due to the lack of clear definitions, many companies rely on legal teams and adopt conservative product designs to mitigate regulatory risks. Additionally, unresolved classification issues prevent policymakers from crafting targeted regulations. Only when U.S. regulators enforce a unified classification standard and define it legally can the market move out of the gray area and operate legitimately.

Challenge 2: What Interoperability Standards Should Be Established?

The core idea of tokenization is that digital assets should flow freely across blockchains, platforms, and financial institutions—just as seamlessly and reliably as data on the internet. Theoretically, this vision is already achievable. Interoperability protocols like Chainlink’s CCIP enable cross-chain and cross-system token transfers.

Despite advancing infrastructure, policy responses lag behind. The U.S. currently lacks a clear regulatory framework outlining compliance obligations for tokenized assets moving across systems. Once assets leave their native environment, questions persist around custody, trading restrictions, investor protection, and compliance obligations.

For example, when a tokenized fund moves from one blockchain to another, it’s often unclear whether the receiving blockchain must meet the same licensing or regulatory standards. Institutions hesitate to transfer assets cross-chain if regulatory requirements are ambiguous. This uncertainty erodes market confidence, fragments liquidity, and limits widespread adoption of tokenized markets.

Challenge 3: What’s Really Preventing Mainstream Users from Entering the Market?

Tokenization is often said to lower barriers to entry, make financial products more trustworthy, and broaden market participation. Yet today, most U.S. customers struggle to access tokenized assets on existing platforms.

A key reason is that regulated tokenized products are typically limited to private offerings or accredited investors. Moreover, fragmented and complex market rules—such as varying remittance regulations across countries, broker-dealer registration requirements, or specialized trust licenses for certain financial activities—make it difficult for retail-focused platforms to launch tokenized products at scale.

This leads to market fragmentation, where institutional investors and high-net-worth individuals gain priority access to tokenized markets while retail customers are left behind. Without clear retail-focused regulations, many platforms operate only in niche or offshore markets.

Additionally, there’s a knowledge gap. Many customers don’t understand what tokenized assets are, how they differ from traditional products, or the value of features like proof-of-reserves, automated compliance, or 24/7 liquidity. Due to the lack of regulatory clarity and viable use cases, public awareness and trust in tokenized assets remain low.