---
title: "The Liquidity Illusion: Why RWA Tokens Aren't Automatically Liquid"
description: "Tokenisation can make assets transferable, but cannot guarantee buyers or exits. Explore RWA liquidity, secondary markets, market makers and redemption risks."
url: https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets
---

Digital Assets & Finance · 3 November 2026· 12 min read

# The Liquidity Illusion

Tokenised assets are easy to create. But can investors actually get out?

By [Dr. Jovian Tan](https://joviantan.com/about) ·Published 3 November 2026

![Illustration titled The Liquidity Illusion: Why Tokenised Assets Don't Automatically Become Liquid? A glass block labelled RWA token holds a modern apartment building, above a broken bridge with a question mark between two cliffs labelled Tokenisation and Liquidity](https://joviantan.com/_img/images/insights/tokenisation-liquidity-illusion-rwa-secondary-markets-1920.webp)

Illustration. The building and token shown are not a real property or product.

**In this article**

Real-world asset (RWA) tokenisation is often presented as a way to unlock liquidity in assets that have traditionally been difficult to trade. Divide a property or other asset into digital units, record ownership on a blockchain, and make those units transferable. The proposition sounds straightforward.

But one critical step is often assumed rather than demonstrated: finding a buyer when an investor wants to exit.

A token can be transferable without being liquid. A marketplace can be technically open without attracting meaningful demand. A price can appear on a screen without a seller being able to execute a meaningful sale at that price.

> **Tokenisation can improve the mechanics of transfer. It cannot manufacture market demand.**

This distinction is central to the next phase of RWA development. The industry must move beyond proving that assets can be represented on-chain and demonstrate that investors can enter, trade and exit under clearly disclosed conditions.

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#1-what-does-liquidity-actually-mean)1\. What does liquidity actually mean?

Liquidity is not simply the ability to press a sell button. In practical terms, it is the ability to transact a meaningful quantity within a reasonable time, at a price that does not move materially against the seller.

A useful assessment has five dimensions:

- **Legal transferability:** Does the holder have a right that can lawfully be transferred?
- **Buyer access:** Are there enough eligible buyers who can participate?
- **Market depth:** Are there genuine bids for a meaningful quantity?
- **Execution quality:** What spread, fees and price impact will the seller incur?
- **Settlement certainty:** Can the trade complete and the proceeds be delivered?

These dimensions are related but not interchangeable. A token may move between whitelisted wallets while the pool of eligible buyers remains very small. A platform may display a reference price while its order book contains little or no executable depth.

The practical test is not whether the token contract permits a transfer. It is whether an investor can complete an exit at a fair and reasonably predictable cost.

 [![Diagram headed The RWA liquidity test, an illustrative framework with five linked stages an investor must pass to complete an exit. Legal rights: can the token legally transfer? Buyer access: who is eligible to buy? Market depth: are there real bids available? Execution: at what price and quantity? Settlement: can the exit actually complete? Below: transferability is not liquidity, and a weakness at any stage can undermine the ability to exit](https://joviantan.com/images/insights/liquidity-test.png)](https://joviantan.com/images/insights/liquidity-test.png) 

The RWA liquidity test. An illustrative framework, not a scoring model.

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#2-blockchain-does-not-create-buyers)2\. Blockchain does not create buyers

A blockchain can record ownership, apply transfer rules and settle transactions. It does not automatically create investors, capital or confidence.

A secondary-market buyer must be eligible under the product's legal and regulatory framework. That buyer must also understand the asset, trust the information, accept the price and be willing to commit capital.

This is especially challenging for real estate. Property is heterogeneous and location-specific. Two units in the same building can differ in condition, floor, tenancy, maintenance obligations, title and financing. Fractionalising exposure does not remove the economic characteristics of the underlying property.

Tokenisation may lower minimum investment sizes and reduce some administrative friction. It does not make the building itself easier to sell, guarantee rental income or ensure that buyers agree on its value.

The [European Central Bank's 2026 analysis](https://www.ecb.europa.eu/press/financial-stability-publications/macroprudential-bulletin/html/ecb.mpbu202604_02.en.html) of tokenisation and the digital capital market discusses the importance of market infrastructure, interoperability and the development of functioning secondary markets. The lesson is broader: technology is one component of a market, not the market itself.

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#3-tradability-is-not-liquidity)3\. Tradability is not liquidity

**Tradability** asks whether an asset can legally and technically change hands.

**Liquidity** asks whether it can change hands efficiently, in meaningful size, at a price close to the market's fair value.

Consider a tokenised commercial property vehicle with 10,000 tokens. Its platform permits transfers between approved wallets. That establishes a transfer mechanism. But if only a handful of investors are willing to buy, and their bids are far below the last indicative valuation, the product is tradable but illiquid.

A displayed price is not necessarily an executable price:

- A last-traded price may be stale.
- A net asset value (NAV) is an estimate or accounting measure, not necessarily an immediate exit price.
- A displayed bid may cover only a small number of tokens.
- A price from one venue may differ from another venue.
- A market maker may reduce or withdraw quotes during stress.

Investors should ask: What is the current executable bid? For what size? On which venue? At what time? What fees, transfer restrictions and settlement delays apply?

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#4-what-does-the-evidence-show)4\. What does the evidence show?

Empirical research is still developing, and studies cover different platforms, periods and asset types. The findings should not be treated as a single market-wide liquidity benchmark.

### [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#a-a-58-property-us-study)A. A 58-property US study

[Laurens Swinkels' 2023 peer-reviewed study](https://link.springer.com/article/10.1186/s40854-022-00427-5) examined 58 US residential rental properties tokenised by one platform between October 2019 and February 2021. Fifty-two properties were in Detroit and six were in other US locations. The study reported a median of 254 owners per property and found that property ownership changed about once a year on average.

The study also found that tokens tradable on decentralised exchanges were about 25% more liquid in its sample. But the secondary-market buyer pool was constrained by whitelisting rules: during the study period, a prospective buyer generally needed to have acquired a token through the management company's website before buying in the secondary market.

This is a useful illustration of the difference between token transferability and broad market access. The study's sample is small, concentrated geographically and historical. Its results should not be generalised to every RWA platform or today's market.

 [![Bar chart headed Where the 58 studied properties were located: 52 in Detroit and 6 in other US locations. Source: Swinkels (2023), 58 US residential rental properties tokenised from October 2019 to February 2021](https://joviantan.com/images/insights/liquidity-study-sample.png)](https://joviantan.com/images/insights/liquidity-study-sample.png) 

The Swinkels (2023) sample: historical, small and concentrated in one city.

### [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#b-buybacks-can-support-activity-but-create-another-dependency)B. Buybacks can support activity, but create another dependency

A 2025 [BIS Working Paper](https://www.bis.org/publications/working-paper-1311-when-bricks-meet-bytes-does-tokenisation-fill-gaps-traditional-real-estate-markets), revised in June 2026, analysed US tokenised real-estate platform data from 2019 to 2025. It found that trading in tokenised properties rose by 35% cumulatively over the two days following natural disasters in the studied areas.

The paper's analysis linked this liquidity response to platform buyback features. It also highlighted a trade-off: buyback mechanisms can support trading during stress, but may increase platform solvency risk.

This finding should be interpreted carefully. It is evidence from a particular dataset and research design, not proof that all buybacks improve liquidity or that the same effect will occur in other markets.

 [![Three figures headed Selected findings from two separate studies. Swinkels (2023): a median of 254 owners per property, and about one year on average between ownership changes. BIS Working Paper 1311: a 35% cumulative rise in trading over two days after disasters, specific to the studied US platform data and buyback features. The figures are not directly comparable](https://joviantan.com/images/insights/liquidity-research-evidence.png)](https://joviantan.com/images/insights/liquidity-research-evidence.png) 

Selected findings from two separate studies. The figures are not directly comparable.

The broader conclusion is that liquidity is shaped by market access, actual demand, trading venues, capital committed by liquidity providers and the credibility of any contractual exit mechanism. It is not an automatic property of the token.

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#5-three-different-routes-primary-issuance-secondary-sale-and-redemption)5\. Three different routes: primary issuance, secondary sale and redemption

An RWA product may offer three distinct routes:

1. **Primary subscription:** An investor purchases newly issued tokens from the issuer or distributor.
2. **Secondary sale:** An investor sells existing tokens to another eligible investor through a marketplace or bilateral transaction.
3. **Redemption or buyback:** An investor returns tokens to an issuer, fund, vehicle or other obligated party under the product's contractual terms.

These routes must not be conflated.

A successful primary issuance does not prove that a secondary market exists. A marketplace does not guarantee that buyers will be present. A buyback facility does not guarantee payment unless the obligation, funding source, conditions and responsible counterparty are clearly established.

Offering documents should explain who is obliged to buy or redeem, whether the obligation is binding or discretionary, how the price is calculated, how often redemption is available, whether limits or gates can be imposed, and what happens if the issuer or service provider becomes insolvent.

 [![Diagram headed How an investor actually exits a tokenised asset. The issuer creates tokens and investor A subscribes in the primary route. Investor A can sell to investor B, an eligible secondary buyer, or redeem with the issuer or fund, only if redemption exists. Important distinction: a marketplace is not a buyer, and a buyback is not cash unless owed under contract and properly funded](https://joviantan.com/images/insights/liquidity-exit-routes.png)](https://joviantan.com/images/insights/liquidity-exit-routes.png) 

Three routes, with different counterparties, conditions and risks.

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#6-why-real-estate-is-especially-difficult)6\. Why real estate is especially difficult

Real estate is a useful case study because the underlying asset is not standardised and can take months to market, negotiate, finance, inspect and legally transfer.

Its value depends on location, occupancy, rental income, title, building condition, debt, taxes, financing costs and local market conditions.

A token representing an interest in a property-owning company or fund may transfer faster than the property itself. But the token's value still depends on the legal claim, the quality of the underlying asset, cash flows and buyers' willingness to acquire that claim.

Other constraints include:

- **Investor eligibility:** Securities laws, private-placement rules or platform policies may limit the buyer pool.
- **Valuation frequency:** Property NAV may be updated periodically while token trading is continuous.
- **Information asymmetry:** Buyers may not have equal access to tenancy, maintenance, debt or valuation information.
- **Concentration:** A small number of holders or one market maker may dominate activity.
- **Operational dependencies:** Transfers may rely on administrators, registrars, custodians, identity checks and platform availability.

A tokenised property investment should therefore be evaluated as a financial product with property exposure, not as a liquid substitute for a listed share.

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#7-market-makers-help-but-they-do-not-guarantee-liquidity)7\. Market makers help, but they do not guarantee liquidity

A market maker can quote buy and sell prices and commit capital to facilitate trading. This may reduce the time an investor waits for a counterparty and improve price continuity.

But market making is not a guarantee that an investor can sell any quantity at any time.

A market maker may widen spreads, reduce quote sizes or withdraw during volatility. Its capacity depends on capital, risk limits, inventory, hedging options and reliable valuation data.

If a product depends on one market maker, the issuer should disclose that dependency and prepare a contingency plan. Relevant monitoring measures include executable quote depth, spreads, completed trading volume, price deviations from NAV, market-maker concentration and periods without executable quotes.

### [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#what-hong-kongs-2026-sfc-framework-illustrates)What Hong Kong's 2026 SFC framework illustrates

On 20 April 2026, Hong Kong's Securities and Futures Commission issued a [circular](https://apps.sfc.hk/edistributionWeb/gateway/EN/circular/intermediaries/supervision/doc?refNo=26EC23) setting out conditions under which it would consider allowing secondary trading of tokenised SFC-authorised investment products. The circular addresses trading channels, fair pricing, liquidity provision, disclosure, client onboarding and notification.

Among other things, it calls for product providers to use best endeavours to arrange at least one market maker, monitor secondary-market liquidity, maintain contingency plans and disclose risks such as thin trading, price deviations from NAV, price fragmentation and reliance on market makers.

This is a product- and jurisdiction-specific framework, principally designed around tokenised SFC-authorised open-ended funds. It is not a universal rule for every token or every country. It nevertheless demonstrates that secondary-market liquidity requires governance and operational arrangements, not just a token contract.

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#8-the-hidden-risk-in-a-buyback-promise)8\. The hidden risk in a buyback promise

A buyback can make an illiquid product appear more liquid than it really is.

Suppose an issuer says it will repurchase tokens at a stated valuation. Investors may interpret that as an assured exit. The actual protection depends on the contract, the funding source and the buyer's ability to pay.

Ask:

- Is the buyback legally binding or discretionary?
- Who is the buyer: issuer, property SPV, fund, manager or affiliate?
- Is there a dedicated, segregated liquidity reserve?
- Is the price based on an independent valuation, NAV, formula or negotiation?
- Are there weekly or monthly limits?
- Can redemptions be suspended, delayed or gated?
- What happens if the buyer becomes insolvent?
- What is the token holder's legal ranking against other creditors?

If the same operating company manages the asset, operates the platform and promises to buy back tokens, operational and counterparty risks may be concentrated in one entity.

A robust structure should clearly identify the asset-holding entity, token administrator, custodian, liquidity provider and party responsible for redemption. Where appropriate, duties and assets should be segregated, with contracts and governance that make each party's obligations clear.

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#9-designing-an-rwa-product-with-a-credible-exit-architecture)9\. Designing an RWA product with a credible exit architecture

Liquidity should be designed before issuance, not added as a marketing claim after tokens have been sold.

A practical framework should cover six areas.

### [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#a-legal-rights-and-transfer-rules)A. Legal rights and transfer rules

Define exactly what the token represents: shares, fund units, debt, beneficial interests, contractual claims or another right. Specify transfer restrictions, investor eligibility, required consents, governing law and the authoritative ownership register.

### [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#b-valuation-and-disclosure)B. Valuation and disclosure

Publish the valuation methodology, update frequency, valuation provider, assumptions and conflicts of interest. Distinguish indicative NAV from executable market prices. Disclose debt, fees, asset performance and material events.

### [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#c-market-access-and-interoperability)C. Market access and interoperability

Explain where the token can trade, who can participate, how wallets are whitelisted, whether transfers between venues are supported and how primary and secondary registers reconcile.

### [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#d-liquidity-provision)D. Liquidity provision

Set measurable expectations for market makers, including quote availability, spread monitoring, minimum quote size where appropriate, escalation and replacement arrangements. Do not imply that these arrangements guarantee a sale.

### [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#e-redemption-and-contingency-planning)E. Redemption and contingency planning

State whether redemption exists, who funds it, how it is priced, its frequency and limits, and when it may be delayed or suspended. Stress-test the arrangement against surges in redemption requests, market closure, valuation uncertainty and service-provider failure.

### [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#f-investor-communication)F. Investor communication

Explain the difference between a token transfer, a secondary-market sale and contractual redemption. Give realistic examples of exit conditions under normal and stressed market conditions.

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#10-a-practical-investor-checklist)10\. A practical investor checklist

Before investing in a tokenised asset, ask:

1. What legal right does the token confer?
2. Who is eligible to buy it from me?
3. Which venue supports secondary trading?
4. What are the actual bid-ask spread and recent executed volume?
5. How much can I sell without materially moving the price?
6. Is the displayed NAV current and independently supported?
7. Is there a market maker, and can it withdraw?
8. Is redemption a contractual right or a discretionary facility?
9. Who funds any buyback, and what happens if that party fails?
10. What restrictions, fees, notice periods and settlement delays apply?

If these questions cannot be answered clearly, do not assume that tokenisation has solved the liquidity problem.

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#conclusion-the-real-innovation-is-the-market-around-the-token)Conclusion: the real innovation is the market around the token

Tokenisation can make ownership records programmable, automate transfer conditions, reduce some administrative friction and broaden access to investment opportunities. These are meaningful benefits.

But a token is only one component of a financial market. Sustainable liquidity also requires legal transferability, a sufficiently broad pool of eligible buyers, reliable valuation, market-making capital, transparent disclosure, operational resilience and credible redemption arrangements.

For an RWA issuer, the most important question is not simply, “Can we put this asset on-chain?”

It is:

> **“When an investor wants to exit, what exactly happens next, who is responsible, and where does the money come from?”**

A project that cannot answer that question has a tokenisation strategy. It does not yet have a complete liquidity strategy.

* * *

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#sources-and-further-reading)Sources and Further Reading

1. **Laurens Swinkels, "Empirical evidence on the ownership and liquidity of real estate tokens", *Financial Innovation* 9, 45, 2023.** The 58-property sample, owner numbers, how often ownership changed, liquidity on decentralised exchanges and the whitelisting constraint. [Read the study](https://link.springer.com/article/10.1186/s40854-022-00427-5).
    
2. **Bank for International Settlements, Giulio Cornelli, "When bricks meet bytes: does tokenisation fill gaps in traditional real estate markets?", BIS Working Paper No. 1311, 28 November 2025, revised June 2026.** Trading after natural disasters, and the trade-off between buyback features and solvency risk. [Read the paper](https://www.bis.org/publications/working-paper-1311-when-bricks-meet-bytes-does-tokenisation-fill-gaps-traditional-real-estate-markets).
    
3. **European Central Bank, "Towards an efficient and integrated digital capital market in Europe: the role of tokenisation and the Eurosystem's policy response", Macroprudential Bulletin 33, April 2026.** Market infrastructure, interoperability and secondary markets. [Read the article](https://www.ecb.europa.eu/press/financial-stability-publications/macroprudential-bulletin/html/ecb.mpbu202604_02.en.html).
    
4. **Securities and Futures Commission of Hong Kong, "Circular on secondary trading of tokenised SFC-authorised investment products", 20 April 2026.** Trading channels, fair pricing, liquidity provision, disclosure, client onboarding and notification. [Read the circular](https://apps.sfc.hk/edistributionWeb/gateway/EN/circular/intermediaries/supervision/doc?refNo=26EC23).
    
5. **Securities Commission Malaysia, "Frequently Asked Questions on Tokenised Capital Market Products".** Further reading on how Malaysia treats tokenised capital market products. [Read the FAQs](https://www.sc.com.my/regulation/regulatory-faqs/frequently-asked-questions-on-tokenised-capital-market-products).
    

* * *

## [#](https://joviantan.com/insights/tokenisation-liquidity-illusion-rwa-secondary-markets#editorial-note)Editorial note

This article is for educational and informational purposes only. It is not investment, legal, tax or financial advice. Regulatory treatment depends on product structure and jurisdiction. Obtain independent professional advice before investing in or launching a tokenised product.

The study figures shown in the graphics are from distinct historical datasets and methodologies. They are not directly comparable and are not current market-wide liquidity benchmarks.

Sources last checked on 3 November 2026.

Share this article

[LinkedIn](https://www.linkedin.com/sharing/share-offsite/?url=https%3A%2F%2Fjoviantan.com%2Finsights%2Ftokenisation-liquidity-illusion-rwa-secondary-markets) [X](https://x.com/intent/post?text=The%20Liquidity%20Illusion&url=https%3A%2F%2Fjoviantan.com%2Finsights%2Ftokenisation-liquidity-illusion-rwa-secondary-markets) 

About the author

[Dr. Jovian Joris Tan Chern Chian](https://joviantan.com/about), professionally known as Dr. Jovian Tan, is a Kuala Lumpur-based technology entrepreneur and the founder and Chief Technology Officer of Bitara, working across blockchain, Web3 infrastructure, AI infrastructure and digital financial infrastructure.

## Related insights

- ![Illustration titled Who Controls Your Crypto? Multisig, MPC, Custody Risk. A gold Bitcoin coin sits inside an open bank vault, while a gold key on a pedestal is linked by lines of light to three glowing people icons](https://joviantan.com/_img/images/insights/who-controls-your-crypto-multisig-mpc-custody-1920.webp)
    
    Digital Assets & Finance · 2 November 2026· 9 min read
    
    ### [Who Controls Your Crypto?](https://joviantan.com/insights/who-controls-your-crypto-multisig-mpc-custody)
    
    Who can really move your crypto? Understand multisig, MPC, custody models, key governance, recovery and the hidden legal risks of digital asset custody.
    
    By Dr. Jovian Tan
    
- ![Illustration titled You Own the Token. Do You Own the Asset? The Hidden Risks of Real-World Asset Tokenization. A glowing gold coin bearing a building icon sits on a pedestal, linked by lines of light to a modern apartment building and a sealed property deed](https://joviantan.com/_img/images/insights/you-own-the-token-do-you-own-the-asset-1920.webp)
    
    Digital Assets & Finance · 1 November 2026· 18 min read
    
    ### [You Own the Token, But Do You Own the Asset?](https://joviantan.com/insights/you-own-the-token-do-you-own-the-asset)
    
    A practical examination of what RWA tokens legally represent, why blockchain proof is not the same as asset ownership, and how investors can evaluate legal rights, custody, insolvency and exit risks.
    
    By Dr. Jovian Tan
    
- ![Illustration titled Can Crypto Be Frozen? Ethereum, Bitcoin, Tether and USDC coins encased in blocks of ice, with a judge's gavel and a classical courthouse behind them](https://joviantan.com/_img/images/insights/can-crypto-be-frozen-1920.webp)
    
    Digital Assets & Finance · 31 October 2026· 17 min read
    
    ### [Can Crypto Be Frozen? The Hidden Controls Behind Digital Assets](https://joviantan.com/insights/can-crypto-be-frozen)
    
    Some cryptocurrencies can be frozen at the token level. Others cannot be frozen by a single company or authority in the same way. The difference is more important than many holders realise.
    
    By Dr. Jovian Tan
    

[All insights](https://joviantan.com/insights)