Tokenization liquidity gaps stall institutional adoption
Tokenization delivers round-the-clock settlement for real-world assets, but shallow order books prevent institutional-scale transactions. UAE on-chain RWAs reached $17 billion by 2025. From Dubai’s fintech hub, this analysis examines liquidity constraints and MENA strategies to address market depth deficits.
Overview
Tokenization enables continuous trading, instant settlement, and programmable ownership for assets including equities and bonds. Figure expanded its On-Chain Public Equity Network on February 4, 2026, while NYSE announced a tokenized securities platform on January 19. Real-world assets face persistent liquidity challenges, characterized by thin volumes and wide bid-ask spreads.
Dubai positions itself as MENA’s blockchain center, building on UAE regulatory infrastructure. GCC tokenization could unlock $500 billion by 2030, but global evidence shows technology solves settlement mechanics without guaranteeing trading depth. Saudi Arabia launched its first RWA center on January 22, 2026.
This report examines three constraints limiting adoption.
Infrastructure readiness fails to generate market depth
Public blockchains enable 24/7 operation and settlement measured in seconds. Custody tools have matured for institutional counterparties. Most tokenized RWAs lack sufficient buyers, rendering tokens technically transferable but practically unsellable near fair value.
“Tokenization delivers speed benefits but not necessarily liquidity, as real trading depth supporting on-chain real world assets remains scarce.”
Significance: In Dubai, where RWAs hit $17 billion on-chain, insufficient depth risks capital immobilization, slowing fintech sector growth.
Fragmented markets force off-chain redemption processes
Leading tokenized RWAs remain stablecoins rather than scalable derivatives. Markets fragment across platforms, market makers decline to commit capital without scale, and redemptions depend on issuers’ off-chain processes—resembling private placements more than public securities.
“Yet for most tokenized real-world assets, liquidity remains elusive. Volumes are thin, bid-ask spreads are wide, and exits often depend not on market depth but on issuer discretion and legal processes that sit firmly off-chain.”
Significance: UAE institutions confront unpriced exit risks, mirroring global CFO concerns and hindering balance-sheet deployment strategies in a $500 billion GCC market.
Legal standardization required to attract market participants
Blockchains improve transparency. Liquidity requires standardization, enforceable rights, and critical mass of participants. Many RWAs offer contractual promises rather than direct claims on underlying assets.
“on-chain” is not synonymous with “liquid,” and that many tokenized RWAs can behave far more like private instruments than tradable securities.”
Significance: Dubai regulators must prioritize legal clarity to attract market makers, accelerating MENA’s transition from pilot programs to active secondary trading.
What’s next / Outlook
Market participants should monitor Saudi’s RWA Center for pilots and UAE tokenized treasuries trading 24/7. GCC expansion to $500 billion demands functional secondary markets; 2026 NYSE approvals could inform VARA rulemaking. Critical developments include issuer incentive structures and cross-border legal standards.
Conclusion
Tokenization excels in settlement speed but encounters liquidity obstacles through thin volumes and off-chain exit dependencies. Dubai’s hub must address these structural gaps for institutional confidence. Legal standardization will determine whether MENA captures $500 billion tokenization potential, reconciling blockchain capabilities with market-making economics.
Sources: PYMNTS, Cobo, Morningstar, The Fintech Times, Zawya
