Tokenized Assets Power DeFi’s $127B Surge, Redefining Institutional Finance

DeFi lending has experienced a significant surge in institutional interest, with total value locked (TVL) rising by 72% year-to-date, from $53 billion at the beginning of 2025 to over $127 billion as of late 2024. This growth is primarily attributed to the increasing adoption of tokenized real-world assets (RWAs) as collateral for stablecoin loans. DeFi protocols are now positioned to facilitate institutional participation due to the accelerated adoption of stablecoins and tokenized assets, according to Binance Research. Notable examples include Maple Finance and Euler, which saw increases of 586% and 1,466%, respectively. Aave Labs' Horizon, an institutional lending market, further underscores this trend by enabling borrowers to use tokenized RWAs as collateral for stablecoin loans.

The rise of DeFi lending protocols is closely tied to the broader tokenization movement. As of mid-2025, on-chain RWAs surpassed $25 billion, with tokenized U.S. Treasuries alone reaching over $6.6 billion. Institutional players, including major asset managers and banks, have begun leveraging blockchain technology to tokenize traditional financial instruments like bonds, equities, and real estate for operational efficiency. Tokenized RWAs now include $15.9 billion in private credit and $7.4 billion in U.S. Treasuries, according to data from RWA.xyz. These developments highlight the growing utility of tokenized assets in facilitating liquidity and enabling new yield strategies within DeFi ecosystems.

Institutional-grade DeFi platforms, such as Horizon, are designed to cater specifically to institutional investors. Horizon allows qualified investors to use tokenized RWAs—like U.S. Treasury bonds—as collateral for stablecoin loans. This innovation opens new avenues for leveraging RWAs within DeFi, transforming traditional assets into programmable financial instruments. Horizon integrates with permissioned and permissionless features, ensuring compliance while maintaining the open nature of DeFi. Real-time pricing data is provided through Chainlink’s oracle services, ensuring appropriate collateralization of loans. Launch partners include major financial institutions such as Ethena, OpenEden, and Securitize, signaling the convergence of traditional finance and DeFi.

The tokenization of RWAs is not only expanding the DeFi lending landscape but also influencing broader financial infrastructure. Central banks and global institutions are exploring tokenized settlement layers to streamline cross-border transactions and reduce settlement latency. Initiatives like BIS-backed Project Agorá and mBridge are advancing tokenized payment solutions, demonstrating the potential for tokenized assets to become foundational components of global financial systems. As these projects mature, they are expected to enhance collateral mobility, reduce counterparty risk, and lower operational bottlenecks—key benefits for DeFi lending.

The integration of RWAs into DeFi lending is also reshaping yield strategies for institutional and retail investors alike. Tokenized assets enable more efficient capital deployment, allowing investors to access yield-bearing instruments that were previously exclusive to traditional finance. For example, investors in DeFi pools can now earn yields on tokenized U.S. Treasuries or private credit instruments, offering returns that surpass those of conventional fixed-income products. This trend is supported by growing regulatory clarity in regions like Europe (MiCA), Hong Kong, and the United States (GENIUS Act), which provide institutional actors with the legal frameworks necessary to engage confidently with tokenized assets.

While the growth of DeFi lending and RWA tokenization presents significant opportunities, it also introduces new risks. The use of tokenized assets as collateral for leveraged DeFi activities has created interconnected risk pathways across markets. A June 2024 report from Moody’s highlighted how leveraged trading using tokenized U.S. Treasuries as collateral could lead to cascading effects for DeFi protocols during market volatility. To mitigate these risks, DeFi protocols are adopting enhanced risk management practices, including diversified collateral portfolios, real-time monitoring tools, and automated risk frameworks like CALM (Continuous Automated Liquidity Management). These measures aim to ensure the stability and resilience of DeFi lending ecosystems.

The surge in institutional interest in DeFi lending is being driven by the growing acceptance of tokenized RWAs as a reliable form of collateral. As more financial instruments are tokenized and integrated into DeFi platforms, the lending landscape is evolving from a niche segment of the crypto market into a mainstream financial infrastructure. This shift is supported by regulatory advancements, technological innovation, and the increasing demand for efficient capital deployment. With TVL in DeFi lending protocols now surpassing $127 billion, the sector is well-positioned to continue its growth trajectory, driven by the expanding utility of tokenized assets and the rising demand for alternative yield opportunities.

Source:

[1] DeFi Lending rises 72% on institutional interest, RWA collateral adoption (cointelegraph.com)

[2] 2025 will make tokenized real-world assets mainstream (crypto.news)

[3] Aave Labs Debuts Horizon to Let Institutions Borrow Stablecoins Using Tokenized Assets as Collateral (Yahoo Finance)