Bridging TradFi and DeFi: Best Practices for RWA Tokenisation on Ethereum | ETHSofia 2026

Um, good afternoon everyone. Thank you for joining us. Um, over the past decade that I've been in this industry, I've seen Ethereum evolve from the experimental stage up to a foundation of increasingly sophisticated financial applications. Um, many of us came into Web3 and I can speak for myself, um, as we believe in the potential of the technology to actually challenge legacy systems. Systems that have historically gated the best financial opportunities behind wealth, geography, status.

So, you know, the 1% and that's not us. Or maybe I shouldn't assume, maybe some of you here are the 1% or maybe all of you here are the 1% so, but that's not me, right? Are you the 1%? No. Are you the 1% Chris?

No. Yep. So, um, RWA tokenization is particularly interesting because it makes traditionally illiquid assets transferable, programmable, and more accessible. So, it unlocks access to assets and you that are typically reserved for the 1%. So, not us, maybe some of you.

Um, but I am of the opinion that tokenization of an asset alone doesn't necessarily make it useful, not immediately. Uh, the big question is what we are building around the asset and whether the DeFi infrastructure that we've invested a whole decade to build can actually provide meaningful advantages over traditional financial systems. So, I know that this topic seems to have been discussed over and over again several times, but I believe that today's panel is a bit different because we are actually going to give, um, concrete takeaways from two very interesting point of view with our panelists. So, with Alvaro, he answered the question of what does the law require? And that's been increasingly important, you know, with all the regulatory pressure that we've been facing.

And with Chris, um he will answer the question of what does the system design require? Um so, um I want to frame this with a quick snapshot of where we are today. Uh Ethereum currently holds approximately 17 billion in tokenized RWAs. So, this is approximately 44% of the global distributed RWA market, around which is a total of around 38 billion. Um across the market, RWA holders grew nearly 60% in a single year.

So, with current numbers sitting at 4.6 million. So, my numbers are as recent as 2 days ago. I was, you know, really monitoring uh what's happening out there. Um capital is visibly rotating.

Uh tokenized treasuries actually did in August, but private credit and other structures grew. Tokenized private credit actually sits at 8.22 billion dollars right now. And um worth noting, depending on how you actually define RWAs, I know there's a bit of a debate around our industry, stablecoins um it now sits at a total of more than 300 billion dollars, and it might be the biggest tokenized RWA application that exists currently today. Um and what is also really interesting is transfer volume uh is up almost 40% month over month with a daily transfer volume at 10.

1 billion dollars. I was a bit surprised to see those numbers at all. So, you know, um it this shows that 2026 we are here. It's no longer part of pilot phase. Institutions are actually using the infrastructure for real balance sheets, real redemptions, and of course we are also looking real legal exposure.

The question is longer can this work, but who's actually doing it right, which is what we're going to talk about today, and what breaks if we get it wrong and when we get it wrong. Um first off, temperature check on the audience. Um hands up if you think we're actually solving all uh financial problems with RWAs. Nobody believes it? Are we solving all financial problems?

Okay, no. No, I guess not. So, um so does it mean that you think that we're actually just putting the same old financial problems on just a new infrastructure and we're going to face the same issues? Yes? And the rest thinking about lunch, I guess.

So, if I ask you today if you're comfortable putting your parents' house on chain or your own house on chain to actually get access to you, are you going comfortable to do that? No, but we're happy trading, we're happy buying meme coins, we're happy buying NFTs. Yes. Okay. Great.

So, you know, I guess the traditional crypto uh risk, you know, taker profile doesn't translate to institutional assets. We still don't trust the institution with what they have for us. So, interesting. Let's see if the panelists will actually change your mind about this. Uh quick fire question for our panelists.

Um quick yes or no. Don't explain to me your thesis. Is Ethereum ready today for a $10 billion institutional RWA fund? Alvaro, yes or no?

Yes.

Yes. Chris, yes or no?

Yes.

Yes. Great. Um so, to get institutional RWAs onto Ethereum at scale, who has to adapt more? TradFi or DeFi? Meaning does TradFi have to adapt to DeFi or the other way around, Avary?

I would say TradFi.

DeFi.

No, TradFi.

TradFi has to adapt. Chris, what do you think?

I would say both, actually. So, I would say that TradFi needs to adapt technologically, but DeFi needs to mature.

Okay, but who has to adapt more? That's the question. TradFi or DeFi? Who has to give in? Who has to compromise more?

One answer. TradFi or DeFi?

Sorry?

Crypto.

DeFi. Okay, interesting. All right, let's unpack why. Going to come in hot on failure points. Um tokenized equities is in the single billions.

Right now, we have two or three billions against a $150 trillion equities market. So, it's actually pretty good, actually, you know, compared to 1 or 2 years ago, there's been real growth. But, if we want real lift-off, we have to scale large. We need to think big, okay? So, uh Chris, if an institution has a legally compliant fund, a custodian, and an Ethereum-based token ready to go, from an economic design point of view, what is the last unresolved problem before you're actually comfortable to say, "Let's put $10 billion of institutional money on Ethereum"?

Something specific, something that maybe you wouldn't think about from an economic design point of view.

So, there are two things. So, there is the economic liquidity that you can get instantly when you just bring assets on chain, but the big unresolved question is the governance of the resulting system. So, if you if a token trades 24/7 and it becomes collateral on DeFi, but the underlying asset is not trading immediately all the time, then you have only a limited redemption window and slower settlement, so then you have a mismatch. And at $10 billion, dollar there is just a problem.

Okay, so basically, you know, like redemption real redemption for such a large sum of money it's it's still a bit problematic. Is that right? Are we are we a bit are we close to resolving it or we kind of far from being able to handle such large scale amounts of money?

I think we have a very very good prototype solutions. So crypto has been very good at institutionalizing governance in form of of DAO and different risk measures and control mechanisms, but those things don't have proven themselves at scale yet. So it's nothing that it's not something that we can immediately transition. There is some some work to do still.

Okay. All right, so Varo, when a trade fire institution wants to issue or hold an RWA on Ethereum, what's the single most common structural mistake that you see them make? You know, for example, oh, they think that a smart contract is actually treated can be treated as a legal agreement perhaps.

Well, that is certainly a problem that has happened before. Obviously, smart contracts are really advanced today, but they are now in no capacity to replace legal agreements. That's why for every tokenized fund that has been launched until now, we have a set of legal agreements and then we have the smart contract that can embed some of the functionalities or some of the characteristics of the legal agreements, but it cannot replace it. It's that's one mistake. But I would say that there are other mistakes.

I think probably the most relevant one is the qualification of token because there are many different ways to to do a tokenization of an asset and sometimes you have the token which is the asset itself which for a fund it could happen. You could have a fund unit in some jurisdictions around in world where that fund unit is the token. You only have one instrument. But sometimes you have instruments with equities, we see it a lot, where you have the share of a company, and then you have a token on top of it that represents rights in the underlying share. So, you have two instruments.

And there is a lot of confusion around this, and you cannot really share that you have in the second scenario, if you hold the token, you are not a shareholder. You just have hold certain rights towards the person that holds that share. So, I think this is a common misunderstanding, and that's still something that we need to be to address today, yeah.

So, it's interesting they brought that up, because I was learning about SPVs recently, and it seems to be on trend right now. For those who don't know what SPVs are, special purpose vehicles.

Correct.

Um is that something that they're doing that would actually solve this issue, or do you think it's something that would cause even more friction with what they're trying to do?

No, exactly. So, most organization projects today are done through SPVs, where you have an asset that is acquired or transferred to a special purpose vehicle, which is a company, and then that company issues a bond, or it issues shares, and those instruments are represented by tokens. The difference is whether the token is the financial instrument itself, or the token just gives you right to like receive a dividend, for example. And in that case, you may have two instruments, and that's where it becomes difficult. But it's not really because of SPVs that this is difficult.

SPVs are actually needed today, because in most cases you cannot do tokenization of real-world assets directly. Like with a house, there have been some tests in Dubai and other jurisdictions, but very limited. But in most jurisdictions, it's still not possible today to do a an actual tokenization of the of real-world asset. You need to interpose an SPV, interpose a company, and then issue financial instruments from that company that are in tokenized form. That's how most organization projects are done.

Okay. So, I may not necessarily be very well versed in it, but you mentioned jurisdiction. So, does would a company say based in the US or Europe actually be able to resolve certain jurisdiction issues with SPVs?

Yes. Actually, that's what I do. It's I advise on

So, it's legal?

Yeah, yeah. Obviously, you can decide on which jurisdiction you use to do your tokenization project.

this is not legal advice, right?

No, definitely not, but but we can discuss after.

All right, continue.

No, and that that's it. Basically, there are some jurisdictions that are better placed today than others to allow for the tokenization of financial instruments in particular.

Okay. So, uh Okay, so we're talking we've been talking about failure points, things that people are doing wrong. So, with that comes along um the issue of accountability. So, I want to explore systemic accountability accountability and kind of weigh the consequences behind each ownership, which is kind of what SPV is trying to do. It's kind of separate the ownership, right?

Um we now have billions of dollars at stake and we're aiming for trillions. So, I think with a lot of regulatory pressure, we need to be able to define accountability better. Uh so, this is a question for both of you. Uh let's take a situation where a smart contract executes correctly, exactly as it is coded, but the outcome contradicts what the legal requirement has promised investors. So, um who should have the power to stop the transaction, right?

That's the question. You know, like we should have a kill switch. So, looking at it from a technical point of view first with Chris, who's actually technically capable of exercising the kill switch? And do you think they can actually make the best decisions? So, I think I know the examples like hot coded circuit breaker or even the multi-sig override.

Um so, technically, how would you approach this?

Yeah, so this is a very valid question and um what you enter here is the discussion about um what does it actually bring if you um implement those solutions on chain. So, um it's basically just a financial system that you build that has some properties and that has some characteristics. And now you can use those characteristics to your benefit or you can basically have to compromise because the system has some of the characteristics. So, crypto was um introduced because it's it was um decentralized. It was um very transparent.

Those are properties that play into the cards if you want to build on top of them. But for the situations uh where that you describe here, where you have to have governance, where you want to have a kill switch, uh you need to introduce an appropriate governance structure, and you need to attribute rights to particular parties or to entities that participate in the system that can break um the circuit. And this has to happen on the multiple levels. So, it can happen on the economic level, it can happen on the legal level, or it can happen on the state level itself. It's not on the on-chain state level, on the transactional level.

And for all of those things, you have to introduce those kill switches, you have to introduce the governance right, you have to introduce mechanisms that allow you to do this. Um in the end, since we are moving and talking about real-world assets, there will be some ramification in the real world. So, in the end, the legal counterparty or the entity or the SPV uh that uh you're describing will win. Because you cannot just uh say that there is a particular state on chain that is the code. And then because of that, you have to have some consequence in the physical world.

Um if those consequences do not manifest physically, you just can- cannot do anything about it. So, therefore, in the end, I would say that the contract is something that will always have priority. Uh and the code is just the execution layer and it is just a machine that you use to facilitate the transaction and the machinery on top of it.

Well, does that make sense legally? Like who should actually hold the power?

No, I think it makes sense what Chris is saying. So, definitely the contracts will always override until at least for the time being once the smart contract is able to reproduce the legal agreement in whole then that may change. But I think there is a figure this I have been pushing for this for a while because in the financial world we have the figure of a financial auditor which typically audits the finances of a company and then is accountable for that auditing. And in the tokenization world we have smart contract auditors that play a role but they are not a regulated activity, right? If as a smart contract auditor I would be responsible in case there is a a failure or a an inconsistency between the legal agreement and the code then that would give more comfort to the users of the token that embeds that smart contract.

So, I think that's something that could eventually be implemented in the future to have smart contract auditors that are accountable for what they're doing and uh they have this legal responsibility the same as a financial auditor. But in the time being then yes, it's as Chris is saying we need to rely on the legal agreements and when you purchase a token that is meant to represent the financial instrument like a unit in a fund you need to read the legal documents and make sure that you know what you're buying because in case there is a mistake that legal agreement is going to be the one that protects your rights. So, yeah.

Okay, but in the DFI world

Mhm.

it's a little bit of a wild west right there.

Mhm.

Um would they be how in which part of the legal agreement would they have because most of this legal agreement kind of leans towards protection of the institutions and you know, kind of investors and everything, right? But from a technical point of view, like is there something that could cover what they do because they're they're actually coding what exactly is asked of them, right? But in that is very straight forward, very literal.

Yes, but normally the way it works is that you have an issuer, for example, a fund that wants to tokenize the units of its fund. That issuer is going to be responsible for two things, what protocol it uses, on what chain it deploys, and then how the token is going to live after this one. So, on what DeFi protocol is going to be traded or whatever. And that responsibility is then embedded into the offering documents, into the legal documents of that fund. So, whoever buys that token, which is supposed to be a regulated instrument, should have access to the legal documents that that back that instrument.

So, even if you're buying it on DeFi, yes, maybe you will not have immediate access today, but in the future you will be obliged because if it's a secondary market, the second the secondary market players need to make this available to the users, and that's a legal requirement.

Okay. So, I know you want

uh what

Sorry, go on.

Just just one more just one more comment from my side on that. So, what we must not conflate at protocols with governance of protocols in this context. So, for example, when we design protocols or crypto economic systems, we just think of the mechanisms on the economic level. So, we say, "Okay, this is what you want this mechanism to achieve or like this is what it's supposed to do. This is representing those kind of assets.

This is how you can exchange them. This is how you can price them. This is how you can enable participants to do something with them." But what we need to introduce is something on the meta level, and this is what what you're referring to here is we need some form of oversight of those protocols, and we need a protocol of protocols. So, we need to have kind of legal protocols, or we need to have supranational institutions that are also protocolized where those protocols would then automatically plug in.

And then you can say, "Okay, then that tool itself that you built is economic, but it is regulated on chain." And then you can make the transition that potentially some of the legal world would also be able to be represented on chain versus what you currently have to do is you have to bring those things in the physical world and have legal contracts representing those oversight mechanisms.

Yeah. I was interested in they brought up oversight of the protocols because, you know, I know you want to talk about ERC-3643, right? The tokenization standards. Does that actually help solve or reduce this pressure on the liability question or does it just shift the liability away?

Well, it helps implement some of the legal requirements to issue regulated products. So, it's definitely the standard that we have seen the most out of those 38 billion that you mentioned before. Officially 32 have been through this or using this standard. And it's a standard that allows to have less friction with the regulation for traditional financial instruments. For instance, it relies on the identification of the end investor that can hold the token.

And this is separate from other standards that will rely on the qualification of a wallet. And the wallet can change ownership and then you don't know who owns the wallet anymore, right? Here you are always with this standard, you're always looking at who is the person behind the the token. What is the real the on-chain identity of that person? And it also embeds other functionalities that are needed in for regulated financial products like for example doing forced transfers if you have a court order when an asset needs to be seized.

It enables the freezing, the the the the transferring, the blocking. And most importantly, it also allows you to recover an asset. So, it's if you have a wallet and you lose the access to that wallet, you lose your private key, you can still, by proving who you are, being the the investor that actually bought the token, you can recover that token. So, that's something that you don't see with other standards, and this gives some comfort to potential investors, right? Knowing that they have their rights more protected with the

Chris, from a system design point of view, does ERC-3643 actually help a lot to guide where you're supposed to go?

Yes, correct. It It solves controllability. So, you can implement a lot of functions, you can implement a lot of rules, you can implement a lot of machinery on top of this standards that helps you to navigate through those assets and requirements that you want to have with them. But, it doesn't solve for liability. So, it's still this strong distinction between which functions or which functionality do you enable in the code?

Now, you can do more, but whom do you call the physically liable for it? This is apart from the contract.

Okay.

Yeah.

Um so, Chris earlier mentioned, you know, the issue of decentralization, you know, um so, I have to bring it up cuz we're talking about TradFi versus DeFi, right? Or well, sorry, but not It's not versus, but bridging it. Um so, the development of MiCA and, you know, similar frameworks that guide a lot of RWAs to tokenize cuz it's under the financial um regulations, they assume a regulated intermediary. So, you know, the kind of TradFi assumptions that we know and we kind of don't really like about it. Um Ethereum's model often removes that or decentralizes that intermediary.

Um well, our whole entire existence here is based on the argument that decentralization is the safer design,

Mhm.

you know? And in DeFi, our instinct is to actually distribute that trust across multiple independent sources. So, what legally, what is the best current uh the current best practice for satisfying the regulators when there's no single responsibility responsible party behind a protocol? It's not something that they're comfortable with.

Before I answer, one fact that is actually funny is that there is no regulation that actually imposes that there is a regulated party behind a liquidity pool or an AMM or anything like that. But having talked to several regulators across the the world, that is indeed a requirement. Whenever you have a protocol as a a set of code, there always needs to be someone that is responsible for what that smart contract is doing. Even if you had deployed it, you don't want to have anything to do anymore with that smart contract, you're not carrying out any oversight.

Mhm.

The regulator still requires that it's if something goes wrong, there needs to be a regulated entity that is responsible for that error or that situation.

But so they've never actually regulated regulated that, but it is assumed that that is absolutely needed.

Indeed, because there always needs to be someone that is responsible. When you have investors, and it's particularly if it's retail investors, people like us, you need to protect those investors. In order to give that protection, there needs to be someone that is responsible in case something goes wrong. And that is the person that will then ensure that you are restituted or that you're compensated in case something goes wrong.

regulators a bit more comfortable now to kind of accept the protocol level type of accountability?

As long as there is accountability, yes. And that accountability can be shared. It can be a it can be a shared protocol, for example, as long as those people are accountable and take the case there is liability, they take that liability. That is contractually feasible, yes.

So Chris, if if we need to start wrapping the tech in a design, right, in a regular entity sort of system. Is that Is that okay? Like, is that doable? Does that actually contradicts our principles in DeFi?

No, it it doesn't. And this is what I actually meant when I said that crypto needs to mature. So, my standpoint here is that that TradFi is TradFi for a reason. It has over a century of um you know, processes and regulations that have developed because they were needed. So, those things were not invented simply because uh it was fun to you know, slow down the the system or to slow down transactions or to just make it more difficult for people to participate or to uh introduce corruption or any other measures.

They were introduced for a reason because the system itself was not trustworthy enough enough or it wasn't functioning well enough without oversight and hence some of those control mechanisms were needed. And crypto was uh starting from a different premise. So, crypto was starting from let's do stuff decentrally and let's just do whatever we want. Uh cryptopunk, crypto anarchy, uh let's just try to build a financial system that doesn't need to be regulated. But this is one of the biggest limitations of crypto while it while it doesn't scale.

So, it does if crypto proceeds to go this route, it would just not acknowledge that uh it there is some control needed. There is some um intelligence needed for markets to function well. Uh you need to break those imbalances and and weak points of of of free markets. And this is why you need to introduce some regulations. But the benefit now is that you can borrow from the best practices from TradFi and try to implement new technical solutions in crypto that would be the best of both worlds.

So, you can basically marry the You can marry the approaches and and then you can uh you can improve the functionality because crypto is transparent for example. So like one of the biggest problems of TradFi, centralization of power, corruption, you know, proprietary information, you can now build control systems that do not have that and this is the big asset.

Yeah, I I come from a very corporate background before I joined this uh this industry and I agree with you but actually what we're doing now is really good cuz we're taking the best of both worlds and trying to create a solution a new type of solution right to for for you know, I guess for the global population here and there's still a lot of things that we can absolutely learn from TradFi even though you know, we fundamentally a lot of people say no, we're going against it but I agree with you completely. Um and I do want to touch a bit on non-negotiables just very quickly cuz we're kind of even though we started a little bit late, um we're going to try to end it a bit on time. Um so Chris, if a traditional asset manager comes to you tomorrow and say we want to tokenize a fund on Ethereum the right way, what is one non-negotiable design principles that you will insist on? This is regardless of asset class.

Um just explicit governance and accountability to architecture.

So you need an an owner a mandate a limit and accountability mechanisms. Who can do what and why and how to control?

Yeah. Um how about you Alvaro from a legal perspective? Something that might that might surprise us in DeFi.

I don't know if this is going to be surprising but for me the key the first element is the jurisdiction cuz you need to ensure that whatever you want to do can be done in the country or in the region where you are operating. So

Okay. Uh so in closing, I have two last questions very quickly. Which asset classes do you actually think they are production ready right now? Chris?

Obviously stablecoins and everything that is liquid.

Okay.

Commodities, for example.

Commodities, gold. I mean, that's one of the biggest commodities right now, yep.

Yes, I would say bonds.

Okay.

And I agree with the stable coins. The stable coins is the biggest use case right now, yeah.

Just to let you know, the top asset classes, US Treasury securities at 15 to 16 billions, commodities is about 4.6 to 5 billion, and most of it is gold. Real estate is the smallest at 200 to 300 million only distributed, yeah. Um okay, closing, quick fire, okay? Name one thing that needs to happen for TradFi to fully trust Ethereum as RWA infrastructure overall.

One thing.

Education.

Education, interesting. Chris?

Clear legal finality.

Okay. So, question for the audience, if all of these things are implemented, we go, will you still put your parents' house on chain and get the yield that you deserve? Oh, okay, a bit more now, great. Okay, I'm just glad that the panelists can actually change a bit of your opinion right now, and I think our time is up, unfortunately. I think we'll still be around for the rest of the conference, so feel free to pull all of us up to have a chat.

Thank you, everybody.

Thank you.