Senior Kucoin executives say that institutional adoption is a key driver behind the rapid growth of the tokenized real-world assets (RWA) market. Management believes that the recently passed Genius Law could double the RWA's market capitalization to $50 billion by the end of the year.
Institutional Adoption: Key Catalysts
According to Tika Lum, Global Business Development Head of VIP and Institutional Clients at Kucoin, institutional recruitment is the most important factor driving the growth of the tokenized real world assets (RWA) market. He explains that while the concept of RWA is not new, the recent surge in debate directly relates to institutions acting as catalysts for expansion.
Lum argues that the institution will bring considerable capital, expertise and reliability, which will accelerate the other two major drivers, resulting in an expansion of asset classes and improved blockchain efficiency. He argues that once key players like UBS and BlackRock enter the market, they examine the sector and create a noble cycle of growth.
To support this assessment, Lum cites Kucoin's first-hand experience and recognizes UMINT, the tokenized product of UBS, which emphasizes its partnership with UBS's asset management, as collateral. He says the initiative positions Kucoin as a pioneer in bringing real-world assets into real-world applications.
Regulation of charge growth
Lum also believes that the recently passed genius act is “a game-changer and, by extension, RWAS.” Under the law, a federal framework for issuing Stablecoin is established to determine eligibility and to regulate who cannot or cannot issue them. The framework also aims to coordinate state and federal regulations to reduce fragmentation.
“Stablecoins are the backbone of RWA's liquidity and we expect to have a significant impact on market expansion and adoption as they allow for seamless on-ramp, collateral and yield generation,” explains Lum.
He adds that the genius law, which promotes innovation in low-cost trading while minimizing the risk of regulation, can accelerate the growth of the RWA market from its current market capitalization of between $24 billion and $50 billion by the end of the year. To prepare for this, Kucoin has built an institution-grade infrastructure and embraced regulatory changes, Lum says.
Lum is also looking at European Union Market (MICA) regulations to ensure full implementation by 2025 – Singapore's CRS 2.0 strengthening and Hong Kong's SFC guidelines are SFC guidelines for mining funds on key regulatory development that further promote the institutional adoption of RWA.
Kucoin's Strategic Partnership
Even before the passage of the act of genius, Kucoin had taken steps to attract institutional clients to the already tokenized RWA market. In November 2024, Exchange partnered with Digift to allow institutional token holders on the Digift platform to use UBS UMINT tokens as collateral for non-exchanges for Kucoin.
The collaboration will allow the companies to meet the growing demand for high-quality, on-chain income assets while ensuring regulatory compliance. Detailing the benefits of Kucoin users, Lum states:
“For native crypto traders, this means improved liquidity. OMINTs can act as collateral and earn yields while reducing opportunity costs. They provide greater access to institutional products without leaving the crypto ecosystem.
Meanwhile, Lum argues that Kucoin accepts UMINT as transaction collateral reduces the barriers for institutions to use tokenized assets in real-time trading, indicating “the viability of RWA for yield generation and liquidity management.” Since announcing support for UBS UMINT, the exchange has received positive feedback and collaboration requests from large traditional asset management companies.
Systematic risks and mitigation responses
Tokenized RWA has significantly improved the growth of the cryptocurrency industry by injecting stability and institutional capital, but also introduces potential systemic risks that industry and regulators must work together to mitigate. Lum identifies the underlying lack of liquidity as one such risk.
“For immature RWA use cases, liquidity inconsistencies can occur. If tokenized assets are facing more redemption pressures than the ones underlying the liquidity of the assets, they will be market freezes or fire sales,” warns Lum.
He also warns that the interconnectivity between digital assets and traditional finance can amplify contagion. Other concerns include regulatory rulings that lead to unconfirmed fraud and money laundering, as well as focus in the event of a dominant platform failing.
To mitigate these risks, Lum says the digital asset industry must prioritize robust smart contract auditing, diversified oracles, and on-chi stress testing. Regulators must implement harmonious global standards, including enhanced knowledge clients (KYC) and money laundering (AML) protocols, as well as issuer capital reserve requirements.
Looking ahead, Lum predicts that the market capitalization of the tokenized RWA sector will reach trillions of dollars within a few years. Although the institution is expected to control, he sees the clarity of regulations as the key to attracting more retail users.
“Clearness in regulations will unlock emerging markets, and innovations such as stable coins that support crop yields will attract retail users,” Lum says.
