Institutions face a choice: decentralize tokenized real-world assets with rollups or reproduce old gatekeepers

Interest from large asset managers and exchange pilots has moved tokenized real‑world assets (RWA) from theory toward production, but the industry is now deciding how those tokens will clear, settle and be regulated. One path adopts permissioned ledgers and centralized layer‑2 operators that appear to make compliance and intervention simple but concentrate sequencing, custody and dispute powers in single entities—recreating many of the same access barriers and single‑point‑of‑failure risks found in traditional finance. An alternative architecture places KYC/AML, identity and transactional controls at the application layer while using public rollups that settle to a neutral base chain; this separates compliance enforcement from ledger finality and keeps sequencing and settlement subject to cryptographic guarantees. That approach aligns with emerging developer work that emphasizes neutral settlement, agent tooling and composability across execution layers, but it depends on addressing three practical limits: sustained throughput, sub‑second or reliable finality, and transaction‑ordering primitives that resist extractable‑value extraction. In practice, unresolved performance and ordering shortcomings have encouraged middleware rent capture—stablecoin issuers, custody providers, sequencers and bridges are already capturing outsized fees and distribution advantages—pushing some high‑volume flows toward platform‑led rails and private networking. Regulators have noticed: efforts to shorten settlement windows or graft programmable settlement onto regulated venues are drawing scrutiny, and policy choices will shape whether tokenized settlement migrates into bank‑anchored or private‑operator models. Market coalitions and exchange pilots (including significant activity in Singapore) are attempting to prove that continuous, auditable liquidity and market‑making are achievable, but they also flag that interoperability, custody standards and clearing integration must improve before on‑chain markets can replace multi‑day legacy settlement. Institutional engineering work—restaking stacks, custody‑integrated yield, MPC custody and agent‑capable tooling—shows capital being positioned for on‑chain use, yet those product advances will not overcome core protocol limits without coordinated protocol and governance upgrades. The tradeoffs are legal as well as technical: who orders transactions and who can intervene affects liability, surveillance obligations and systemic resilience. If the industry standardizes on closed or operator‑controlled rails, tokenization risks becoming cosmetic—on‑chain records with the same gatekeeping and concentration as today. Widespread adoption of rollups that inherit a neutral base‑layer security model could expand access, lower operational concentration risk and improve auditability, but realizing that promise requires deliberate design choices around throughput, finality and neutral ordering primitives plus harmonized regulatory frameworks. The near term will likely be bifurcated: experimental and retail activity on public chains, while monetizable institutional flows concentrate on high‑performance, compliance‑integrated rails unless the open‑layer stack is redesigned.