Why Tokenization Alone Is "Not a Win"
The paradox: assets are coming on-chain, but not into DeFi
Tokenization is accelerating across global markets. Treasuries, gold, commodities, private credit, and structured products are increasingly being represented on-chain by large financial institutions. On the surface, this looks like progress toward an open, interoperable financial system.
In practice, something very different is happening. Most tokenized assets today are issued into closed or semi-closed environments, optimized for issuer control, regulatory clarity, and internal settlement efficiency. While these systems succeed at representing assets on-chain, they rarely provide a native path into composable DeFi markets. Each asset exists within its own constrained ecosystem, governed by issuer-specific rules, legal structures, and access controls. The result is fragmentation, not integration. Assets move on-chain, but capital does not flow.
Tokenization solves representation, not usability
For traditional institutions, tokenization is primarily an operational upgrade. It improves settlement speed, reporting, custody transparency, and ownership tracking. These benefits are real, but they stop at the point of issuance. What tokenization does not solve on its own is how assets:
Interact with other assets
Enter pooled liquidity markets
Support borrowing and leverage
Move freely across protocols and chains
As a result, many tokenized assets remain economically inert. They exist on-chain, but cannot be easily borrowed against, pooled, or integrated into broader financial markets without bespoke work.
Why this happens
1. Every issuer creates a new asset, even if it’s “ERC-20”
On paper, many tokenized assets look compatible. In reality, they are not. Even when two assets share the same token standard, each issuer introduces its own stack of assumptions:
A unique legal and regulatory wrapper
A unique redemption and settlement process
Distinct liquidity characteristics
Different custodians, administrators, and counterparties
Asset-specific oracle requirements
Distinct operational and failure modes
From a DeFi protocol’s perspective, these are not “one more ERC-20.” They are entirely new risk objects. Compatibility at the smart-contract level does not translate to compatibility at the financial or risk level.
2. DeFi protocols cannot underwrite thousands of bespoke assets
DeFi money markets are designed around standardization, not endless customization. Protocols in the lineage of Aave, Compound, etc are not built to continuously absorb thousands of new collateral types, especially when each one demands:
Custom risk parameters
Bespoke liquidation logic
Independent oracle validation
Ongoing monitoring and governance overhead
Scaling this process to thousands of issuer-specific assets is not feasible. As more tokenized assets appear, liquidity does not deepen, it splinters. The long tail of tokenized assets remains unlisted, unused, and disconnected from DeFi. The bottleneck is not demand. It is integration friction.
3. TradFi will not make “DeFi integration” a core roadmap item
This is not a failure of ambition, it is a rational design choice. Traditional institutions do not want to:
Negotiate DeFi governance listings
Maintain integrations across multiple chains
Operate DeFi-specific incident response workflows
Design and manage liquidation mechanics
Take downstream responsibility for permissionless usage
Nor should they. Their mandate is to issue assets safely and compliantly, not to become DeFi infrastructure operators. As a result, most tokenized assets are deliberately:
Transfer-restricted
Limited to specific venues
Deployed in controlled environments
As a result, they are tokenized, but are deliberately constrained, even when demand for broader usage exists.
Where Multipli fits
The missing layer is abstraction. For tokenized assets to become usable at scale, issuer-specific complexity must be absorbed, risk must be standardized, and liquidity must be pooled into shared financial primitives. DeFi protocols should not need to integrate with hundreds of bespoke assets to access onchain capital.
Multipli is designed to sit at this intersection, bridging tokenized assets and composable DeFi markets by normalizing complexity and enabling shared liquidity without forcing issuers to change how they operate.
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