Venture capital’s raison d’être is to invest in innovation and enable the scaling of disruptive companies across sectors. After investing in and backing the growth of blockchain technologies and various tokens, the last six years have witnessed the proliferation of tokenization of different assets: real estate, gold, bonds, and money market funds.
The idea of taking high-value, illiquid assets and breaking them down into bite-sized, tradeable (and ultimately liquid) assets is highly appealing. And doing it inexpensively and transparently, with some rules and guardrails around trading, sounds so obvious. Indeed, everybody is doing it. Well, almost everybody.
The recent disruption across industries has not gone unnoticed. In real estate, platforms like RealT, Lofty AI, and Propchain have fractionalized properties, turning million-dollar assets into tradeable tokens for as little as $50 per share, a market that could surpass $4 trillion by 2035. Tokenized gold has surpassed $2.5 billion in market value, led by PAX Gold and Tether Gold, which are bringing one of the world’s oldest asset classes fully on-chain.
In asset management, one of the clearest benefits of tokenization is its ability to lower barriers to entry. Traditionally, private markets have been limited to large institutions or ultra-wealthy individuals, with minimum investments often starting at $1 million or more. Tokenization changes this by breaking ownership into smaller pieces.
We are already seeing this play out with Hamilton Lane ($850 billion in AUM), for example, introducing a tokenized feeder fund that allowed investors to invest at $20,000 instead of the usual $5 million, and BlackRock’s tokenized money market fund ($BUIDL). Just this week, JPMorgan Chase announced the tokenization of a private-equity fund on its blockchain platform, with plans to roll out a full fund-tokenization system, Kinexys Fund Flow, next year. Platforms like Singapore’s ADDX are building the infrastructure to let accredited investors buy into global private markets in the same way.
For general partners, this means tapping into a more diverse base of investors. For investors, it means access to an asset class that was once out of reach. In a world where interest in private markets continues to grow, tokenization could make participation far more inclusive.
At its core, tokenization means representing ownership in a digital format on a blockchain - an infrastructure that is finally moving beyond its bubble phase. These tokens can be divided into smaller units, transferred more easily, and even programmed to carry certain rights or rules. That may sound technical, but the implications are far-reaching.
Leading the way across the world is the UAE, which has built one of the most comprehensive global frameworks for tokenized assets. With three distinct regimes - ADGM’s digital securities framework, DIFC’s investment token rules, and VARA’s focus on real-world asset tokens - it offers clarity where many markets still sit in grey areas.
This stands in contrast to the US, where digital assets are largely treated as traditional securities, slowing innovation; or the EU, where progressive rules like the Markets in Crypto-Assets Regulation (MiCA) remain fragmented in practice. By comparison, the region is ahead of the curve, positioning itself as a leader in shaping the future of tokenized capital.
So what does this mean for all the venture capital funds that have invested in, and enabled the proliferation of this technology? How can we use this concept, not just fund it? Can this be a democratization tool for access to venture capital funds?
Let’s examine this. For decades, venture capital has followed a familiar rhythm. Funds raise large commitments from a small circle of high-net-worth investors, family offices, and institutions - limited partners (LPs). They invest that capital into high-growth companies, and once those companies exit, they return the capital and profits to their LPs. It is a model designed for patience, but one that offers little flexibility along the way.
Tokenization has the potential to turn this around, converting LP positions (capital commitments) into digital tokens. If the commitment of an LP is represented by a token (as Hamilton Lane has now done with the aforementioned fund), then the traditional challenges associated with the industry - high entry price, illiquidity, and long hold periods - can be addressed.
To begin with, the minimum required investment can be reduced tremendously - if Hamilton Lane reduced its minimum from $5 million to $20,000, what truly prevents other venture capital firms from following suit? The inexpensiveness of structuring tokenized funds with traditional funds is incredibly appealing and democratizes access to the public. It means anybody can invest in venture capital and young, innovative technology companies - they don’t have to wait for them to go public and grow tremendously. Everybody can have access to the innovation economy - as backers, not just users.
The second breakthrough lies in liquidity. Venture funds have long operated on lock-up periods of ten to twelve years. For most investors, that has meant waiting until the end of the cycle before realizing substantial returns. Tokenization opens the door to regulated secondary markets where fund tokens can be traded. In practice, this gives investors options they never had before: the ability to sell their position early or adjust exposure mid-cycle without going through expensive secondary fund managers. For fund managers, the prospect of liquidity can make fundraising easier, as investors are more comfortable knowing they have a potential exit route. We may even see the rise of continuously fundraising or open-ended tokenized funds, where tokens can be bought and sold in near real-time. Liquidity in private markets was once unimaginable. Tokenization makes it possible.
Beyond access and liquidity, tokenization can also streamline fund operations. Smart contracts - or automated digital agreements - can digitize capital calls, distribute returns, or run compliance checks. Transfers that once took weeks (and cost investors returns) could be completed in minutes. Over the lifetime of a fund, these efficiencies add up. They reduce costs, decrease risks, and allow managers to spend less time on administration and more on building value.
Although incredibly exciting, tokenization is not without obstacles. Regulation is still uneven across markets, legal definitions of digital securities are evolving, and true liquidity requires critical mass. Needless to say, broader adoption will depend on building further understanding (and confidence) among investors and managers.
Tokenization is already taking shape across asset classes - from gold and property to bonds and equities - and will soon touch those who helped fund its rise. For venture capital, tokenization is a structural shift. An industry built on patience and relationships now has the chance to add flexibility, efficiency, and innovation without losing its core value. For many, tokenization still sounds like a technical detail. But it could become a defining force in changing how capital flows in venture: It will expand access and increase liquidity, creating transformation across the value chain.
Could tokenization be the next major leap in how value moves through venture capital, a change we are only starting to imagine? And for an asset class that has always been technology-focused yet slow to transform operationally, could this finally be the moment it evolves from funding innovation to fully embracing it?
