The RWA Battle in the First Market: How the Five Major Protocols Are Redefining Institutional Capital Allocation

Over the past six months, the development speed of institutional-grade RWA tokenization has been remarkable. The market size has approached the $20 billion mark, and this is not a speculative bubble but a large-scale deployment of real institutional capital on-chain. In the primary market, traditional finance has begun to seriously examine the feasibility of blockchain as infrastructure.

Currently, five major protocols are shaping the RWA ecosystem in the primary market: Rayls Labs, Ondo Finance, Centrifuge, Canton Network, and Polymesh. Interestingly, they are not competing for the same clients but are each targeting different core institutional needs—banks require privacy, asset managers pursue efficiency, and Wall Street demands compliance infrastructure. This differentiated competitive landscape is actually accelerating the adoption of RWA infrastructure in the primary market.

Invisible Growth in the Primary Market: $19.7 Billion Institutional RWA Landscape

Three years ago, tokenized RWA was almost unrecognized by the market. Today, on-chain assets such as government bonds, private credit, and public equities are close to $20 billion. Compared to the $6-8 billion range at the start of 2024, this growth exceeds 200%.

According to the latest market snapshot in early January 2026, the distribution of RWA assets in the primary market shows a clear hierarchical structure:

Government bonds and money market funds dominate, with $8-9 billion, accounting for about 45%-50% of the market share. These assets are most attractive to institutions due to their extremely low credit risk, high liquidity, and clear regulation—these are the three factors primary market investors value most.

Private credit is the fastest-growing segment, expanding rapidly from $2 billion to $6 billion, accounting for 20%-30%. Although the base is small, the annual growth rate has exceeded 100%, reflecting institutions’ desire to tokenize higher-yield assets.

Public equities have just started, exceeding $400 million, but with the steepest growth trajectory. Led mainly by Ondo Finance, this sector is gradually changing institutional perceptions of on-chain stock allocations.

Three Engines Driving RWA Adoption in the Primary Market

Realistic Yield Arbitrage Appeal
Tokenized government bond products offer annualized returns of 4%-6% and support 24/7 access, whereas traditional markets are limited by T+2 settlement cycles. For institutions managing hundreds of billions of idle capital, this means billions of dollars in additional annual income. Private credit tools with 8%-12% annual yields further expand arbitrage opportunities.

Gradual Improvement of Regulatory Frameworks
The EU’s Markets in Crypto-Assets Regulation (MiCA) has been enforced in 27 countries, creating a unified regulatory expectation for the primary market. The US SEC’s “ProjectCrypto” is building a federal-level on-chain securities framework. More critically, SEC’s No-Action Letters have enabled traditional financial infrastructure like DTCC to legally engage in asset tokenization.

Mature Custody and Oracle Infrastructure
Chronicle Labs has processed over $20 billion in total locked value, and Halborn has completed security audits for all major RWA protocols. These infrastructures have reached a maturity level capable of handling custodial standards—representing the real threshold for entry into the primary market.

However, the primary market still faces structural bottlenecks. Cross-chain transaction costs amount to $1.3-$1.5 billion annually, and the price differences for the same assets across different blockchains reach 1%-3%. The conflict between privacy and regulatory transparency remains unresolved, posing practical constraints for institutions planning large-scale capital deployment.

Rayls Labs: Privacy Solutions for Banks in the Primary Market

Rayls Labs positions itself as a compliance-first bridge connecting banks and DeFi, developed by Brazilian fintech Parfin, supported by Framework Ventures, ParaFi Capital, Valor Capital, and Alexia Ventures. Its core is a public permissioned EVM-compatible L1 blockchain designed specifically for regulated entities.

Rayls’ Enygma privacy stack addresses the real challenges faced by banks in the primary market, not just the imagined needs of the DeFi community. This technology includes five core functions: zero-knowledge proofs to ensure transaction confidentiality; homomorphic encryption for encrypted data computation; native cross-chain and private network operations; confidential payments supporting atomic swaps and embedded “payment delivery”; and programmable compliance with selective disclosure to designated auditors.

In practice, the Central Bank of Brazil has used it for CBDC cross-border settlement pilot, Núclea has completed its first regulated receivables tokenization, and several undisclosed clients are using it for private payment delivery workflows.

In mid-January 2026, Rayls announced the completion of a Halborn security audit, providing institutional certification for banks seeking production-level deployment. More importantly, the AmFi alliance has committed to tokenizing $1 billion on Rayls and will receive 5 million RLS tokens as rewards. As Brazil’s largest private credit tokenization platform, AmFi brings immediate transaction volume to Rayls and has set a concrete 18-month milestone—currently the largest institutional RWA commitment in any blockchain ecosystem.

Rayls’ challenge lies in demonstrating market traction without publicly available TVL data. The $1 billion AmFi target by mid-2027 will be a key test, determining Rayls’ actual influence in the primary market.

Ondo Finance: Cross-Chain Expansion Reshaping Retail Boundaries in the Primary Market

Ondo Finance has achieved the fastest expansion from institutional to retail in a short period. From an initial focus on government bonds, it has become the dominant player in tokenized public equities.

As of the latest data in early January 2026, Ondo’s TVL reached $1.93 billion, with tokenized stocks exceeding $400 million, accounting for 53% of the global market. Holdings of USDY on Solana reached $176 million, indicating retail acceptance of tokenized assets far beyond industry expectations.

In mid-January 2026, Ondo launched 98 new tokenized assets covering AI, electric vehicles, and thematic investments. It also announced plans to launch US stocks and ETFs on Solana in Q1 2026, representing its most aggressive attempt to build retail-friendly infrastructure. According to its product roadmap, the goal is to eventually list over 1,000 tokenized assets.

The significance of this move is that Ondo is testing whether tokenized securities can generate sustainable liquidity at retail scale. Its multi-chain deployment strategy is insightful—Ethereum provides DeFi liquidity and institutional legitimacy, BNB Chain covers native exchange users, and Solana supports large-scale consumer use and sub-second finality.

Notably, Ondo achieved a TVL of $1.93 billion amid declining token prices—this is the real market signal. The growth mainly stems from institutional demand for government bonds and the actual need for idle stablecoin yields in DeFi protocols, not speculation. The TVL growth during the Q4 market consolidation further validates the genuine demand for RWA in the primary market.

However, Ondo still faces practical challenges. Price fluctuations outside trading hours—despite tokens being transferable at any time—may cause arbitrage spreads during US night trading. Strict KYC and certification requirements mandated by securities law also limit its “permissionless” narrative.

Centrifuge: On-Chain Exit for Asset Managers in the Primary Market

Centrifuge has become the de facto standard for institutional private credit tokenization. By December 2025, its TVL soared to $1.3-$1.45 billion, driven entirely by real institutional capital deployment.

The most representative partnership is Janus Henderson—this global asset management giant with $373 billion AUM deployed the Anemoy AAACLO fund on Centrifuge. This is not nominal cooperation but a genuine complement, using the same investment management team as Janus Henderson’s $21.4 billion AAACLO ETF. In July 2025, Janus Henderson announced an additional $250 million investment on Avalanche, further strengthening trust in Centrifuge’s infrastructure.

The Grove fund allocation within the Sky ecosystem exemplifies another institutional deployment model. An initial commitment of $100 million, with $50 million in startup capital, led by teams from Deloitte, Citigroup, Block Tower Capital, and Hildene Capital Management. This portfolio itself represents one of the most serious capital aggregations in the primary market.

In mid-January 2026, Centrifuge announced a partnership with Chronicle Labs to introduce an oracle framework that provides cryptographically verified ownership data. This framework supports transparent NAV calculation, custody verification, and compliance reporting, even offering dashboards to LPs and auditors. It is the first oracle solution truly meeting institutional needs—providing verifiable data without sacrificing on-chain efficiency.

Centrifuge’s operational model embodies the actual needs of the primary market. Unlike competitors that simply package off-chain products, Centrifuge directly tokenizes credit strategies during issuance. The process is transparent and automated: issuers design and manage funds through a single workflow, institutional investors allocate stablecoins for investment, funds flow to borrowers upon credit approval, and repayments are proportionally distributed to token holders via smart contracts. The annualized return on AAA assets ranges from 3.3% to 4.6%, fully transparent and traceable.

Its multi-chain V3 architecture supports Ethereum, Base, Arbitrum, Celo, and Avalanche, ensuring liquidity is not overly concentrated. Crucially, Centrifuge has demonstrated that on-chain credit can support institutional deployments of tens of billions of dollars. The partnership with Janus Henderson itself provides proof of this capacity.

Centrifuge’s leadership in setting industry standards—co-founding the Tokenized Asset Coalition and the Real-World Asset Summit—further consolidates its role as infrastructure rather than just a single product.

However, its target 3.8% annualized yield appears relatively modest compared to the high-risk, high-return opportunities historically seen in DeFi. The next challenge for Centrifuge is how to attract DeFi-native liquidity providers beyond Sky ecosystem allocations.

Canton Network: Wall Street’s Vision for Public Chains in the Primary Market

Canton is a direct response to the permissionless DeFi paradigm by institutional-grade blockchain—an privacy-preserving public network supported by top Wall Street firms. Participants include DTCC, BlackRock, Goldman Sachs, and Citadel Securities, which alone define the power structure of the primary market.

Canton’s ambition is clear: targeting the $3.7 quadrillion annual settlement volume processed by DTCC in 2024. This is not a future vision but a direct benchmark against current market scale.

In December 2025, Canton’s collaboration with DTCC made significant progress. This is not just a pilot but a core commitment to building the US securities settlement infrastructure. With SEC No-Action Letter approval, this partnership enables some US Treasuries, held in custody by DTCC, to be tokenized natively on Canton, with a planned production MVP in the first half of 2026.

DTCC and Euroclear serve as co-chairs of the Canton Foundation—meaning Canton is not just a participant but a governance leader. Initial focus is on government bonds due to their minimal credit risk, high liquidity, and clear regulation. After MVP success, expansion to corporate bonds, equities, and structured products is expected.

In mid-January 2026, Canton’s institutional value proposition was further clarified. Temple Digital Group launched a private trading platform demonstrating Canton’s operational model—central limit order book with sub-second matching speed, non-custodial architecture. Currently supporting crypto and stablecoin trading, plans include tokenized stocks and commodities support in 2026.

Deployment by ecosystem partners confirms Canton’s attractiveness. Franklin Templeton manages $828 million in money market funds, JPMorgan Chase executes payments and settlements via JPM Coin—both partnerships represent institutional votes of confidence in Canton’s infrastructure.

Canton’s privacy architecture is based on smart contract-level design using Daml (Digital Asset Modeling Language). Its cleverness lies in tiered visibility: contracts specify which participants can see which data, regulators can access full audit logs, counterparties can view transaction details, while competitors and the public cannot see transaction info. This design offers Wall Street institutions accustomed to Bloomberg terminals and dark pools both blockchain efficiency and protection from proprietary trading activity exposure.

With over 300 participating institutions, Canton demonstrates strong institutional appeal. However, much of the reported trading volume may still be from simulated pilots rather than actual production traffic. Development speed is a real challenge—delivering MVP in the first half of 2026 reflects multi-quarter planning cycles, whereas DeFi protocols can often launch new products within weeks.

Polymesh: A Securities Blockchain with Built-in Compliance

Polymesh stands out through protocol-level compliance rather than complex smart contracts. Designed specifically for regulated securities, Polymesh performs compliance verification at the consensus layer, eliminating reliance on custom code.

Its core advantages include three aspects:

• Protocol-level identity verification via licensed KYC providers.
• Embedded transfer rules that cause non-compliant transactions to fail at consensus—preventing issues before they happen, not just auditing afterward.
• Atomic payment delivery with finality within 6 seconds.

Production-level integrations demonstrate the feasibility of this model. Republic began supporting private securities issuance in August 2025, and AlphaPoint covers over 150 trading venues across 35 countries. The target scope has expanded to regulated funds, real estate, and corporate equity.

Compared to traditional ERC-1400 tokens’ complexity, Polymesh’s approach is more attractive for securities issuers—directly embedding compliance into the protocol rather than relying on complex smart contracts. No need for custom audits, automatic adaptation to regulatory changes, and inability to execute non-compliant transfers—these three features constitute substantial improvements for securities tokenization in the primary market.

The current challenge is that Polymesh operates as an independent chain, which makes it relatively isolated from DeFi liquidity. To address this, Polymesh plans to launch an Ethereum bridge in Q2 2026. Achieving this on schedule will be critical to consolidating its position in the primary market.

The Differentiated Ecosystem of the Primary Market: Why the Five Protocols Are Not Competitors

The importance of these five protocols lies in the fact that they are not competing in the same market because a single RWA market does not exist. Each addresses different institutional challenges:

Differentiation in Privacy Solutions
Canton focuses on Wall Street’s trading counterparties’ confidentiality via Daml smart contracts; Rayls offers bank-level privacy through zero-knowledge proofs; Polymesh provides a protocol-level identity verification for comprehensive compliance. These three solutions target three entirely different privacy needs.

Contrasting Expansion Strategies
Ondo manages $19.3 billion across three chains, prioritizing liquidity speed over depth; Centrifuge focuses on the $13-$14.5 billion institutional credit market, emphasizing depth over speed. One pursues breadth, the other depth.

Clear Client Segmentation
Banks and CBDCs choose Rayls, retail and DeFi opt for Ondo, asset managers prefer Centrifuge, Wall Street favors Canton, and securities tokens are built on Polymesh.

This market segmentation is more critical than it appears. Institutions are not seeking the “best blockchain” but infrastructure that solves their specific compliance, operational, and competitive needs. Because each of these five protocols has strengths, the RWA ecosystem in the primary market can develop rapidly.

Structural Bottlenecks and Unsolved Challenges in the Primary Market

Despite rapid growth, the primary market still faces four major structural challenges.

Fragmented Liquidity Across Chains
Cross-chain transaction costs are $1.3-$1.5 billion annually. The same assets traded on different blockchains have price differences of 1%-3%, due to high bridging costs. If this persists until 2030, annual costs could exceed $75 billion. This is the most concerning long-term challenge—no matter how advanced the tokenization infrastructure, liquidity fragmentation will undermine efficiency promises.

The Paradox of Privacy and Transparency
Institutions need confidentiality, while regulators require auditability. In multi-party scenarios (issuers, investors, rating agencies, regulators, auditors), each party needs different levels of visibility. No perfect solution currently balances this conflict.

Global Regulatory Fragmentation
EU’s MiCA regulation is enforced in 27 countries, while the US requires case-by-case SEC no-action letters, taking months each time. Cross-border capital flows face jurisdictional conflicts. A unified regulatory expectation has yet to emerge.

Systemic Risks of Oracles
Tokenized assets rely on off-chain data. If data providers are attacked, on-chain asset performance may reflect false realities. Although Chronicle’s asset proof framework offers partial solutions, risks remain.

Decisive Moments in 2026: Four Catalysts

2026 will be a critical turning point for the primary market. These four events will determine whether RWA truly becomes mainstream institutional allocation:

Ondo’s Launch on Solana (Q1 2026)
Testing whether 98 new tokenized assets can create sustainable retail liquidity. Success indicators include over 100,000 holders, proving genuine non-institutional demand.

Canton’s DTCC MVP (H1 2026)
Verifying blockchain’s feasibility in US government bond settlement. If successful, trillions of dollars could shift onto on-chain infrastructure—redefining the entire scale of the primary market.

US CLARITY Legislation Passage
Providing a clear federal regulatory framework, enabling cautious institutional investors to deploy capital with confidence.

Centrifuge’s Grove Deployment
$1 billion in funds must be allocated within 2026. This real capital deployment will test the feasibility of credit tokenization for institutions. If executed smoothly without credit events, it will significantly boost asset managers’ confidence.

The Vision for 2030: Trillion-Dollar Market Transformation

Based on current momentum and catalyst expectations, the market size targets are as follows:

Tokenized assets to reach $2-4 trillion by 2030, requiring a 50- to 100-fold growth from the current $19.7 billion. This growth depends on three necessary conditions: regulatory stability, cross-chain interoperability, and no major institutional failures.

Industry growth projections suggest divergence:

• Private credit from $2-6 billion to $150-200 billion (small base but highest growth rate).
• Tokenized government bonds could surpass $5 trillion if money market funds migrate on-chain.
• Real estate may reach $3-4 trillion (depending on whether property registries adopt blockchain-compatible titles).

The $1 trillion milestone is expected around 2027-2028, distributed as:

• Institutional credit: $30-$40 billion
• Government bonds: $30-$40 billion
• Tokenized stocks: $20-$30 billion
• Real estate and commodities: $10-$20 billion

This requires a fivefold increase from current levels. While ambitious, considering the institutional momentum in Q4 2025 and upcoming regulatory clarity, this goal is not out of reach.

The 18-Month Decisive Battle in the Primary Market

2026 will determine the actual adoption of RWA infrastructure. The four major tests during this period will redefine the future of institutional capital allocation:

• Ondo’s Solana launch tests retail expansion capabilities
• Canton’s DTCC MVP tests institutional settlement capacity
• Centrifuge’s Grove deployment tests credit tokenization feasibility
• Rayls’ AmFi target tests privacy infrastructure adoption

Execution takes precedence over architecture; results matter more than blueprints. This is the core logic of the current primary market.

Traditional finance is heading toward a long-term on-chain migration. These five protocols provide the necessary infrastructure: privacy layers, compliance frameworks, and settlement infrastructure. Their success will determine whether tokenization becomes an efficiency upgrade of existing structures or a new system replacing traditional financial intermediaries.

The infrastructure choices made by institutions in 2026 will shape the industry landscape for the next decade. Trillions of assets are already beginning to migrate.