Real Estate Tokenization Set to Democratize $326 Trillion Market Despite Skepticism

During a recent event, Securitize Chief Operating Officer Michael Sonnenshein expressed skepticism about the suitability of real estate for tokenization, arguing that traditional systems for real estate are already effective and that tokenization offers only marginal improvements. However, this perspective overlooks several key points about the transformative potential of real estate tokenization.

Real estate is the world’s largest asset class, and dismissing its potential for tokenization overlooks the significant inefficiencies in the current real estate market. Traditional real estate transactions involve extensive paperwork, high fees, and lengthy settlement periods, which can be particularly complex for cross-border deals. Tokenization technology, with its ability to automate compliance through smart contracts and provide immutable record-keeping, is uniquely positioned to address these systemic issues.

Sonnenshein’s assertion that the onchain economy demands more liquid assets misinterprets the primary need of everyday investors. For the majority of people excluded from institutional-grade real estate investments, the goal is not liquidity but meaningful access to an asset class that has historically generated substantial wealth. Traditional real estate investment vehicles often require significant minimum investments, accredited investor status, and long capital lockup periods, effectively excluding a large portion of the population from participating in prime real estate properties.

Tokenization changes this dynamic by allowing fractional ownership, enabling investors to participate with as little as $100 and receive proportional income distributions. This democratized access is in high demand, even if secondary market liquidity initially lags behind more liquid markets. Tokenization technology excels at creating transparent, secure fractional investment opportunities with minimal overhead, making it possible for a $50 million residential development project to be divided into 500,000 tokens, each representing an equal share of rental income and potential appreciation.

This fractionalization transforms how people can build wealth through real estate. Previously, Real Estate Investment Trusts (REITs) were the primary path to diversified property exposure, often with high fees and limited transparency. Tokenization allows investors to build personalized portfolios across multiple property types, all managed through a single digital wallet. The resistance to this evolution comes not from the technology itself, but from outdated regulatory frameworks and incumbent business models.

The conservative stance on real-world asset (RWA) growth projections overlooks the accelerating infrastructure development underway. Institutional giants like BlackRock, UBS Asset Management, Hamilton Lane, and Franklin Templeton have launched tokenized investment vehicles, signaling a fundamental shift in how traditional finance views tokenization technology. Each institutional entrant not only adds to the ecosystem but also exponentially increases connectivity and liquidity pools, creating a self-reinforcing cycle that reduces friction for subsequent entrants.

The narrative should focus on what is being built rather than current limitations. Secondary marketplaces optimized for real-world assets are emerging, regulatory clarity is increasing in key jurisdictions, and each development strengthens the foundation for mass adoption. The endgame of real estate tokenization is to make institutional-grade property investments accessible to everyone, democratizing access to an asset class that has created more millionaires than any other investment vehicle in history.

Despite skepticism from some executives, the adoption of tokenized real estate and other real-world assets will continue to grow. The transformative potential lies in democratizing access to an asset class that has historically generated substantial wealth, making it possible for a broader range of investors to participate in the real estate market.