Institutional Interest in Tokenization Grows
Hedge funds are moving closer to embracing tokenization, with 33% actively pursuing or exploring the technology for their fund units in 2025. This finding comes from the 7th Annual Global Crypto Hedge Fund Report, released on November 5 by AIMA and PwC. The survey, which included 122 institutional investors and hedge fund managers representing nearly $1 trillion in assets under management, revealed that 52% of respondents expressed interest in tokenized structures. Managers cited broader investor access and operational efficiencies as the primary drivers behind their exploration of on-chain fund units.
Real-World Asset Market Reaches All-Time High
The increased institutional interest in tokenization coincided with the real-world asset (RWA) market reaching an all-time high of $35.8 billion on November 7, according to rwa.xyz data. Tokenized money market funds accounted for a substantial portion of this growth, boasting a market capitalization of $8.7 billion. The BlackRock USD Institutional Digital Liquidity Fund (BUIDL) led this sector with $2.8 billion, followed by Circle USYC at $990 million and Franklin OnChain U.S. Government Money Fund at $844 million. These three products significantly outpaced the remainder of the tokenized money market universe.
Smaller Managers Leading Tokenization Adoption
The report indicated that smaller fund managers are more willing to experiment with tokenization. Sub-$1 billion AUM managers showed 37% interest in tokenized structures, compared to 24% among their larger counterparts. Macro strategy managers displayed the highest interest at 67%. Crypto-native hedge funds are further along the tokenization curve, with 16% of respondents having already tokenized fund units or planning to do so within a year. Additionally, 8% have allocated to tokenized real-world assets, suggesting earlier adoption within the crypto-native sector.
Regulatory Hurdles Remain, but Infrastructure Gains Traction
Despite growing interest, legal and regulatory uncertainty remains the primary barrier to the broader rollout of tokenization. Seventy-two percent of respondents cited legal uncertainty and limited investor demand as primary obstacles, alongside concerns about interoperability and system integration. Regulatory challenges vary by region, with 44% of North American managers identifying regulatory uncertainty as their top barrier, compared to 28% in EMEA and 9% in APAC. Nevertheless, hedge funds are increasingly utilizing regulated, tokenized money market funds and tokenized treasuries for liquidity management and collateral purposes.
Managers reported tangible benefits, including faster settlement, enhanced yield, and lower operational risk, even as the ecosystem continues to mature. Traditional hedge funds identified legal and compliance services as the area in greatest need of improvement, with 40% of respondents flagging this concern. Crypto hedge funds prioritized access to banking, legal, and compliance support, as well as custody infrastructure.
Coinbase CEO Highlights 24/7 Trading Potential
Coinbase CEO Brian Armstrong highlighted the potential of tokenization to eliminate traditional market constraints in a statement on November 6. He stated:
“It’s nearly 2026, and billions of people still have to wait for the US to wake up before they can trade the best financial markets. Trading hours and markets that close are outdated. Tokenized assets will be better for everyone, with instant settlement and 24/7 availability.”
Armstrong’s comments align with hedge fund managers' views on the operational advantages of tokenization, particularly regarding settlement speed and market accessibility. Looking ahead, 15% of surveyed managers expect tokenized hedge fund structures to become the industry standard within a decade. The majority (55%) anticipate that tokenized and traditional formats will run in parallel, while only 13% believe tokenization will remain niche or specialized.
The report positions tokenization as moving beyond conceptual pitch decks toward live implementations, initially anchored in tokenized cash and fund units. The pace of broader adoption remains tied to regulatory clarity and demand from allocators.