Tokens and Tanks - ForkLog: Cryptocurrencies, AI, Singularity, the Future

# Tokens and Tanks

When RWA Can’t Withstand Real-World Pressure

What if tomorrow someone captures a oil rig divided into a thousand tokens or the state claims it as its own property?

Questioning this, ForkLog looked behind the curtain of real-world asset tokenization and saw the gap between the rising value of the RWA segment, its usefulness, convenience, and guarantees.

A Challenge for Lawmakers

RWA is undoubtedly an interesting and groundbreaking segment. Thanks to tokenization of real-world objects, there is now the ability to monitor the current state of a business or asset 24/7, retail investors gained access to previously closed resources, energy, and stock trading on the blockchain.

For traditional finance (TradFi) participants, RWA offers new liquidity streams from retail, the opportunity to sell expensive illiquid assets, and acquire more valuable ones. Additionally, the crypto derivatives market provides new rails for old financial instruments and can embed real-world assets into perpetual futures contracts, not to mention the variety of DeFi mechanics.

However, behind the obvious advantages of asset tokenization, it’s easy to overlook the flip side.

Given escalating global tensions and increasing geopolitical uncertainty, the risks of owners losing control over RWAs are high. History has seen repeated attempts at devaluation and nationalization of property:

• British “Enclosures” (15th–19th centuries). The process of converting communal lands into private property. Lords fenced off pastures, depriving peasants of access to resources. This increased productivity (wool for manufacturing), but ultimately created a class of impoverished proletarians;
• Railway mania (1840s). In 1845, Britain experienced a boom: hundreds of companies issued shares to build railways. People invested their last money into “paper” railroads. When the bubble burst, investors went bankrupt, but the physical rails remained. They were bought up cheaply by large banks and formed monopolies that earned profits for decades;
• Post-Soviet privatization (1990s). The socialist USSR aimed for common ownership of resources by all citizens. For example, a factory worker owned a share of the enterprise they worked for. After the collapse, the system collapsed: privatized shares plummeted in value and were skillfully bought up by businessmen. Sometimes factory directors created conditions where vouchers devalued, then invested in them through shell companies.

Another potentially dangerous vector of asset loss is military conflict. If a tank destroys a building partially owned by an investor or an invader claims territory, help will likely only come from insurance companies.

Insurance policies include “political risk” categories, but for crypto innovators, these are still theoretical.

The advent of cryptocurrencies and blockchain has posed a new challenge for lawmakers. Major regulatory regimes in the US, EU, Singapore, and popular offshore jurisdictions have proposed their versions of corporate law and retail investor protection, relying on old statutes. However, even these systems do not yet eliminate all legal and structural risks associated with tokenizing real assets.

On-Chain Risks Are Not Enough

There are three popular models for legally structuring RWAs:

• SPV (special purpose vehicle) — equity or debt capital. The real asset is legally transferred so that the SPV becomes the sole owner. Investors hold tokens that give them a claim against the SPV;
• Master fund. A central “master fund” is created to hold and manage the actual portfolio (e.g., US Treasury bonds, corporate loans, or real estate). Small “feeder funds” or SPVs are registered in specific jurisdictions (e.g., one in the EU, one in the US). They issue digital tokens for sale to investors;
• Claim-based tokens. For the asset owner (e.g., real estate developer or business owner), this form primarily functions as a financing tool. The asset remains on the balance sheet without transferring ownership rights to third parties. The owner signs an agreement with the platform, committing to transfer part of the income (rent, revenue, or interest) to token holders via smart contracts. At the end of the term or upon sale of the asset, the final value is paid out, and obligations are canceled.

Source: AdamSmith. According to the law firm AdamSmith, for tokenized funds regulated by the EU, Luxembourg’s RAIF and Irish ICAV/QIAIF are typically chosen. For global capital outside the US, Cayman SPC structures remain standard. For projects targeting America, Delaware registration with favorable tax benefits is common.

Experts consider Switzerland, Germany, and Liechtenstein as leading centers for RWAs.

By 2026, the tokenization market has become more mature, but legal experts continue to address political risk protection through complex legal schemes and contractual mechanisms. Some platforms use not only smart contracts but also guarantees from risk insurance agencies with advanced structures.

For example, Ondo Finance, a leader in the RWA market, has a base asset of US government debt and ETFs from BlackRock. In their case, aggressive “capture” or nationalization of the real asset is unlikely and equates to US default risk. By 2026, they expanded into stock markets, using custodians like BNY Mellon with their own protection mechanisms.

Centrifuge, one of the oldest protocols, operates through an SPV structure. In case of physical seizure of an asset in the real world, their legal structure allows investors to sue in the SPV’s jurisdiction (usually Luxembourg or Delaware). Some of their lending pools in developing countries (via partners like Credix) can be insured through private PRI companies.

Insurer Goldfinch operates in high-risk regions: developing markets in Africa and Latin America. Its borrowers (local financial companies) often must insure their portfolios against political risks through traditional insurance companies.

The decentralized on-chain insurance leader, Nexus Mutual, has a rich track record. Managed by a DAO, it makes decisions on policy issuance. Platform participants invest in pools to cover financing, earning interest from policyholders.

Cases include various on-chain risks: smart contract hacks, DeFi platform failures, and stablecoin depeg events.

Source: Nexus Mutual. Insurance products are well-developed, but their coverage is limited to the “digital realm,” which is insufficient for the RWA segment. They do not address critical physical-world components—such as the loss or destruction of tokenized assets.

In February 2026, Nexus Mutual, in partnership with crypto insurer OpenCover, launched the “On-Chain Risk Map” project. An interactive scheme designed to detail all potential obstacles for crypto investors and related sectors turned out to be incomplete.

Fragment of the “On-Chain Risk Map” showing custodial loss risk. Source: The Onchain Risk Map. The loss of material value relates to the custodial risk—holder of the asset. But in the map, it’s only represented as regulatory confiscation, indicating that insurance market leaders are not yet ready for full PRI coverage.

Influential Investors, Cloud Cities, and Bans

A sudden change in a regulator’s political stance can instantly impact any RWA project. This happened with Satoshi Island, an island NFT-state in Vanuatu.

Despite promises to settle the first residents in 2023, at the time of writing, no houses from the planned modular structures have been built. The only resident was one of the project leaders, Denis Troyak.

Over the years, he developed an investor community and demonstrated the benefits of living away from civilization.

Watch our video & see how we’re turning a dream into reality!
Yes, we already own the island
Yes, we can develop as advertised
Yes, the government supports our plan
Yes, our team has relevant expertise

🏝️#satoshiisland a home for crypto enthusiasts & professionals worldwide! pic.twitter.com/1O05kmfrN1
— Satoshi Island (@satoshiisland) January 27, 2022

It turned out investors cannot own land directly. The island belongs to local landowners and is leased to the project. As a result, NFT buyers only get sublease rights, not full ownership.

Vanuatu regulators issued warnings in 2024 that Satoshi Island Limited does not have a license for permanent residence or citizenship, despite the project actively marketing this.

In July 2025, the team officially announced the suspension of all digital asset transactions, effectively freezing the secondary NFT market.

As a result, the Satoshi Island Coin (STC) token devalued. As of February 24, 2026, its price had fallen over 99.9% from its all-time high ($48 to about $0.004).

Another illustrative case, not directly related to tokenized assets, demonstrated the conflict between the crypto industry and outdated laws.

Investors in the city of Próspera, in the Honduran ZEDE (Economic Development and Employment Zone), suffered from a change in political leadership. The project was based on the ZEDE law, which granted investors unprecedented autonomy.

The government of President Siomara Castro, elected on anti-“corporate colonialism” rhetoric, officially repealed the law. In September 2024, Honduras’ Supreme Court declared it unconstitutional.

In response, Honduras Próspera Inc. filed a $10.7 billion lawsuit in ICSID arbitration at the World Bank. Its representatives demanded compensation amounting to a third of Honduras’ GDP, citing a 50-year legal stability guarantee.

In 2024–2025, the Latin American country began withdrawing from ICSID to avoid paying possible rulings in favor of Próspera.

For investors, fighting the state in such a situation would be nearly impossible without a substantial list of capital backers. Early participants include billionaire Naval Ravikant, Network State concept creator Balaji Srinivasan, and activist Patry Friedman, closely working with Peter Thiel’s fund.

Thanks to Palantir’s founder, the conflict drew attention from the US Congress, aiming to elevate the case to an international level and exert pressure on Honduras’ authorities.

Despite ongoing lawsuits, Próspera continues operations. The highest building on the island, Duna Residences, along with office and medical centers, has been built with investor funds.

Source: Próspera. The community hosts over 200 companies and about 1,000 jobs. Digital nomads, crypto entrepreneurs, and scientists live there. Próspera is known as a hub for biohacking and medical tourism. Its liberal regulation allows testing advanced gene therapies and longevity treatments not yet approved in the US.

Srinivasan offers solutions to already reduce political risks for the RWA segment—an integral part of his vision of “network states.”

His main idea revolves around decentralization and the power of code over law. Although he admits that the legal aspect remains the weakest link in creating “digital archipelagos.”

He believes that protecting RWAs in a “network state” should involve dispersing assets across jurisdictions. If one country’s authorities try to confiscate a building, they won’t be able to destroy the entire structure.

For example, if later a claim is paid out for a destroyed or expropriated property in one place, the community can build two new ones elsewhere.

All property becomes cryptography.
Let me explain why.

(1) First, right now, trillions of dollars worth of digital gold is secured onchain. Bitcoin is now valued everywhere there is an internet connection. And no matter what political faction you’re in, everyone agrees on the… https://t.co/rwJ3MLMfxd

— Balaji (@balajis) July 27, 2025

In his July 2025 post “All Property Becomes Cryptography,” Srinivasan described simple technical points that make it harder for anyone to seize assets.

He sees RWA development as a fundamental shift in ownership itself. Srinivasan emphasizes that traditional property rights always relied on violence (police and armies), whereas cryptographic rights rely on mathematics.

“The ultimate goal is to make any form of property as difficult to confiscate as Bitcoin. We are moving from a world where property rights are confirmed by the state to a world where they are confirmed by knowledge of the private key,” — the businessman believes.

He is confident that the future belongs to assets that cannot be “turned off” by a simple government order. This leads to the concept of “cryptographic safes” not only for data but also for physical objects.

In conclusion, the RWA segment today is in a “gray zone” of its evolution. On one side, we have convenience and liquidity; on the other, unresolved issues of the “last mile,” where blockchain meets kamikaze drones and nationalization.

Traditional legal tricks like SPV and Luxembourg funds remain important crutches, but cases like Satoshi Island and Próspera show that even the most ambitious projects can become hostages of political regimes. RWA investors need to consider not only smart contract audits but also the macroeconomic landscape of the region.

The gap between the segment’s growth and real guarantees remains large. However, if Srinivasan’s theory is correct, over time, “capturing an oil rig” will become pointless if, without a cryptographic key, it turns into a heap of worthless metal that cannot be legally sold or used in the global digital economy.