Pantera Capital published its 'State of Tokenization' report on May 20, revealing that while the tokenization market has surpassed $321.1 billion, the vast majority of assets remain at an early stage of blockchain maturity. The analysis evaluated 542 active tokenized assets across 11 asset classes using Pantera's proprietary Tokenization Progress Index (TPI), a framework designed to measure on-chain maturity beyond simple digital representation. The report concluded that 77.6% of the market consists of "wrapper" assets—essentially traditional financial products with a blockchain veneer—while only 2.7% qualify as true native on-chain assets capable of autonomous operation. This finding underscores a critical gap between market expansion and functional blockchain implementation. The tokenization industry has attracted major institutions including BlackRock, Franklin Templeton, and JP Morgan, yet most products remain structurally dependent on off-chain infrastructure and manual processes.
Understanding the Tokenization Progress Index
The TPI evaluates three operational dimensions of tokenized assets:
Issuance and Redemption: How autonomously and symmetrically assets can be issued and redeemed on-chain.
Transfer and Settlement: Whether blockchain serves as an authoritative ledger for asset movement and payment.
Composability: The degree to which assets integrate with smart-contract-based financial infrastructure such as DeFi protocols.
The average TPI composite score across all 542 evaluated assets was 2.04 out of 5 points, indicating that most tokenized assets lack sophisticated on-chain functionality.
Three Maturity Tiers
Pantera categorized tokenized assets into three stages based on TPI scores:
Wrapper Stage (77.6% of market)
Wrapper assets represent the lowest maturity level. Custody, redemption, and management of underlying assets occur primarily off-chain, with the token functioning as a digital receipt. While blockchain may improve distribution and visibility, core operational infrastructure remains within traditional financial systems. This structure preserves existing control mechanisms but forgoes blockchain's autonomous capabilities.
Hybrid Stage (11.1% of market)
Hybrid assets move portions of the asset lifecycle—such as issuance, transfer, settlement, or limited composability—onto the blockchain. However, critical functions remain dependent on off-chain intermediaries, legal procedures, and manual human oversight.
Native Stage (2.7% of market)
Native assets are designed to operate entirely on-chain. Smart contracts handle substantial portions of issuance, transfer, settlement, and asset management, with minimal dependence on off-chain operational infrastructure. Only 21 of 542 evaluated assets reached 4–5 points on the composability dimension, indicating that true native on-chain functionality remains rare.
Detailed Performance by Function
Issuance and Redemption: The Bottleneck
Issuance and redemption emerged as the most constrained operational area. Of 542 evaluated assets, 494 (91.1%) scored 1–2 points, reflecting continued reliance on administrator-controlled issuance and custodian-managed manual redemption. Only 13 assets (2.4%) achieved 4–5 points, demonstrating that truly autonomous and symmetric issuance-burn models remain exceptional.
Transfer and Settlement: Moderate Progress
Transfer and settlement capabilities showed the most advancement, with an average score of 2.29 points. Of 542 assets, 205 (37.8%) reached the 3-point level, indicating an emerging transition period where assets move on-chain. However, only 35 assets (6.5%) scored 4 or higher, meaning fully on-chain independent settlement remains uncommon.
Composability: Limited Integration
Composability—the ability to interact productively within DeFi and other on-chain financial protocols—scored lowest. Of 542 assets, 394 (72.7%) remained at 2 points, while only 21 (3.9%) reached 4–5 points. Most tokenized products function as simple distribution wrappers rather than productive financial components capable of integration with broader on-chain ecosystems.
Comparison to Early Internet Media
Pantera likened the current tokenization market to early internet media, which simply copied newspaper articles onto websites without fundamentally restructuring content or revenue models. Initial internet media improved information speed and accessibility but retained traditional formats. Over time, native digital formats emerged—podcasts, algorithmic feeds, interactive graphics, real-time comments, and social distribution—that leveraged internet-specific capabilities.
The tokenization market occupies a similar stage. Current products represent progress by placing assets on blockchain, yet many retain traditional financial structures intact. A tokenized asset operating on a permissioned ledger, requiring manual off-chain redemption via OTC transactions, prohibiting transfer without issuer approval, and offering no DeFi integration functions as "traditional securities with a blockchain receipt" rather than true on-chain native financial instruments.
Real-World Examples
Despite these structural limitations, institutional adoption continues to expand:
BlackRock's BUIDL: The tokenized money market fund exceeded $2 billion in assets under management in April 2025.
Franklin Templeton's FOBXX: An on-chain money market fund operational since 2021.
JP Morgan's Kinexis: Processes billions of dollars in daily transactions.
While these examples demonstrate market growth, Pantera emphasized that asset scale, institutional participation, and launch volume indicate market presence but do not measure the degree to which assets operate autonomously on-chain.
The Core Question: Representation vs. Redesign
Pantera's analysis highlights a fundamental distinction: the tokenization market has proven that assets can be represented on blockchain, but has not yet demonstrated that asset operations themselves have been fundamentally redesigned for on-chain environments.
The critical question is no longer "How much has been tokenized?" but rather "Which products remain digital replicas of traditional finance, and which have begun creating on-chain-exclusive functionality?"
True on-chain native financial products would feature programmable compliance, autonomous collateral management, real-time yield optimization, embedded governance, and structures that decompose asset cash flows and risk in ways impossible within traditional infrastructure.
The Path Forward
The tokenization market has achieved quantitative growth but remains qualitatively nascent. Issuance and redemption remain constrained, settlement structures often depend on dual-ledger systems, and DeFi composability concentrates among select asset classes and products.
The next phase of tokenization will not be defined by the quantity of assets migrated to blockchain, but by whether those assets deliver functionality impossible to implement through traditional financial infrastructure—faster settlement, enhanced transparency, protocol interoperability, and novel cash flow and risk structures.
The $321.1 billion tokenization market is no longer a pilot program, yet the majority of assets remain digital replicas of traditional finance rather than blockchain-native innovations. Future competition will center on functionality rather than packaging.
