Op-Ed: RWAs are revitalizing DeFi by providing much-needed liquidity and stability, with over $20 billion now locked in assets like US Treasuries and gold.
There has long been a tension between decentralized finance (DeFi) and traditional finance (TradFi), with DeFi proponents often encouraging crypto users to “unbank” themselves and abandon TradFi altogether. This is, however, an outdated mindset. What DeFi can and should do is modernize and improve TradFi - and we are seeing this happening through the success of tokenized real-world assets (RWAs).
On April 11, the value of all tokenized RWAs, which are currently dominated by tokenized US Treasuries but can also include real estate, gold, and other commodities, crossed an all-time high of over $20 billion, despite both digital and traditional assets suffering heavy losses during the same period. Indeed, RWAs are bringing money into DeFi at an exponential rate, which has the potential to transform the sector.
RWAs as a Liquidity Lifeline for DeFi
One of the biggest pain points in DeFi is liquidity. When times are good, money flows in, but when times are bad, it quickly leaves. An example of this cycle is the DeFi boom of 2021, when $161.4 billion flowed into DeFi protocols between January 1 and November 15, 2021, taking total TVL to $176.7 billion at its peak. However, when that bull market bubble burst, $125.2 billion flowed out of DeFi by July 1, 2022, taking total TVL to just $51.45 billion. [Source DeFi Llama April 18, 2025].
In a bear market, DeFi grinds to a halt, which is a huge barrier to the growth and development of the sector. And this is where RWAs can contribute something truly meaningful to DeFi. Through the tokenization of stable assets like US treasuries, gold, and real estate, crypto natives can balance volatility in their portfolios and - importantly - keep their stable investments within the DeFi ecosystem when the market turns sour.
Indeed, the stability that RWAs offer has already brought significant liquidity to the DeFi ecosystem. Since January 1, 2023, the value of tokenized RWAs locked inside DeFi protocols has grown by $10.5 billion to $11.3 billion at the time of writing. This means the RWA sector now accounts for more than 12% of the entire DeFi ecosystem, and it is expanding rapidly. According to DeFi Llama, the DeFi RWA sector grew an astonishing 43% between January 1 and April 18, 2025, adding $3.4 billion to the DeFi ecosystem. [Source DeFi Llama April 18, 2025]
In any market condition, this is huge growth over such a short period. However, in a market that has seen trillions of dollars wiped from share prices in less than a month due to global trade tariffs implemented by the US, it is particularly notable. Indeed, it seems that, just as TradFi investors flock to these “safe haven” assets in times of trouble, now crypto natives are fleeing to the same reliable, real-world assets within DeFi.
Premier Institutional Backing
And this is, in no small part, thanks to the world’s biggest asset manager - BlackRock - and its on-chain RWA fund BUIDL. With a TVL of close to $2.4 billion [Source DeFi Llama April 18, 2025], BUIDL is now the largest tokenized RWA fund. This indicates that we are entering a new level of institutional adoption through tokenized real-world assets. Indeed, the Boston Consulting Group predicts that the tokenized RWA market will hit $19 trillion by 2033.
BUIDL predominately tokenizes US treasuries, and Ethena – a crypto-native project – has chosen to invest heavily in the fund to back its stablecoin, while Tether and Sky DAO have long been backing their coins with US government bonds.
The adoption of US treasuries and other RWAs by crypto companies is rapidly bringing more liquidity and stability into DeFi. While not every crypto native will be thrilled with this shift, there are good reasons for decentralized finance to embrace this inflow of tokenized RWAs. Together, DeFi and TraFi are evolving a hybrid system that combines the benefits of existing off-chain assets with the characteristics of tokens.
Slow and Steady Wins the Race
Indeed, DeFi has little to lose from embracing some of the most trusted and stable assets in the “real world”. While not typically considered a growth asset, gold has returned 96% over the past five years, growing from $1,688 per troy ounce on April 21, 2020, to $3,315 at the time of writing [Source: GoldPrice April 18, 2025]. This is, though, somewhat of an unprecedented moment for gold (excepting the Global Financial Crisis of 2008/9). Rather, RWAs like gold, US treasuries, and real estate represent highly stable assets that can stabilize otherwise high-risk crypto portfolios.
As we see more RWA integrations, the liquidity that these more reliable assets bring will help DeFi to hold on to more TVL during sell-offs, ultimately allowing the sector to thrive rather than be forced to hibernate during bear markets.
It isn’t just DeFi that is benefiting from bringing off-chain assets on-chain, either. Any tokenized RWA asset enjoys the benefits of blockchain technology, including full transparency, 24-hour price discovery, and immutability that prevents manipulation and fraud.
A Liquid, Stable Future for DeFi
The adoption of tokenized real-world assets, particularly by world-leading institutions like BlackRock, will bring sorely-needed liquidity and stability to decentralized finance. Rather than bleed out during a bear market, the tokenized RWA sector will help to hold liquidity in DeFi as crypto investors feel more confident to remain in these more stable assets.
More than this, RWAs can also help onboard investors new to crypto. For most, RWAs like US treasuries, real estate, and gold are much easier to understand than complex DeFi products, protocols, and tokens. It is these kinds of products - ones that bridge the worlds of traditional and decentralized finance - that will ultimately be successful, and RWAs are blazing a trail.
Indeed, RWA tokenization is truly becoming one of the most promising use cases for the integration of TradFi into DeFi and a welcome addition to a market that needs liquidity and stability to take it to the next level of growth and success.
The growth of the tokenized RWA sector at a time when some analysts are warning of a potential global recession underlines this important shift in the DeFi sector. Far from betraying its roots, embracing RWAs will propel DeFi into its next phase: a hybrid financial system that combines blockchain’s transparency with the stability of trusted assets.
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