Barry Sternlicht: $125B Firm Ready to Tokenize but U.S. Rules Block It

Barry Sternlicht, the billionaire founder and chairman of Starwood Capital Group, says his $125 billion real estate firm is ready to offer blockchain-based tokens to clients — but regulatory uncertainty in the United States is preventing it from moving forward.

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The comments, reported by CoinDesk, underscore a growing frustration among institutional players who see tokenization as the next evolution of asset management but remain sidelined by an unclear legal framework.

Sternlicht's remarks put a high-profile name behind a complaint that has been building across the real estate and financial services industries for years: the technology to tokenize real-world assets exists and is maturing rapidly, but the U.S. regulatory environment has not kept pace.

For a firm managing $125 billion in assets, the inability to deploy tokenized offerings represents a significant missed opportunity — both for the company and for investors who could benefit from more liquid, accessible real estate products.

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What Tokenization Would Mean for Real Estate

Real estate tokenization involves representing ownership stakes in properties or funds as digital tokens on a blockchain. In theory, this allows fractional ownership, faster settlement times, 24/7 trading, and broader investor access to asset classes that have traditionally been reserved for institutional or accredited investors.

A property worth $100 million, for example, could be divided into millions of tokens, each representing a small ownership share that can be traded on secondary markets.

For a firm like Starwood Capital — which manages portfolios spanning hotels, residential properties, commercial real estate, and infrastructure — tokenization could unlock liquidity in assets that are notoriously illiquid.

Real estate investments typically require long lock-up periods, and selling a stake in a private fund can be cumbersome and slow. Blockchain-based tokens could, at least in principle, change that dynamic entirely.

The broader market for tokenized real-world assets (RWAs) has been gaining momentum. According to data from various industry trackers, the total value of tokenized assets on public blockchains has grown substantially over the past two years, with tokenized U.S. Treasuries and money market funds leading the charge.

BlackRock's BUIDL fund, launched on Ethereum, has become one of the most prominent examples of institutional tokenization in practice. Real estate, however, has lagged behind — in large part due to the regulatory issues Sternlicht is highlighting.

The Regulatory Bottleneck

The core issue, according to Sternlicht and other industry voices, is that U.S. securities law was not designed with tokenized assets in mind. The Securities and Exchange Commission (SEC) has historically treated most digital tokens as securities, subjecting them to the full weight of registration requirements, disclosure rules, and investor accreditation standards.

While these protections serve a purpose, critics argue they create prohibitive costs and legal ambiguity for firms looking to tokenize traditional assets.

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There is no clear-cut regulatory pathway for a real estate firm to issue tokenized fund shares to retail investors in the United States. Offerings must typically comply with Regulation D (limited to accredited investors), Regulation A+ (which has its own caps and filing requirements), or full SEC registration — none of which were designed for blockchain-native instruments.

The result is a patchwork of workarounds that add cost, limit the investor base, and undermine the very efficiencies tokenization is supposed to deliver.

The technology is ready. The demand is there. What's missing is a regulatory framework that allows institutional-grade tokenization to operate at scale in the U.S.

This regulatory gap has pushed some tokenization activity offshore. Jurisdictions like Switzerland, Singapore, the United Arab Emirates, and the European Union — which recently implemented the Markets in Crypto-Assets (MiCA) regulation — have moved faster to create legal clarity for digital asset issuance. U.S.-based firms risk falling behind if the domestic regulatory picture does not evolve.

Industry Momentum Despite Hurdles

Despite the regulatory headwinds, the tokenization trend is not slowing down. Major financial institutions including BlackRock, JPMorgan, Franklin Templeton, and Goldman Sachs have all launched or explored tokenized products.

Boston Consulting Group has estimated that the market for tokenized illiquid assets could reach $16 trillion by 2030, with real estate representing one of the largest potential segments.

On the legislative front, there are signs of movement. Several bills addressing digital asset classification and stablecoin regulation have been introduced in Congress, and the current administration has signaled a more crypto-friendly posture than its predecessor.

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The SEC under new leadership has also begun engaging with industry stakeholders on how existing frameworks might be adapted for tokenized securities. Whether this translates into actionable regulatory clarity remains to be seen.

Sternlicht's public comments carry weight precisely because of who he is — not a crypto-native founder, but a traditional real estate mogul managing one of the largest private investment firms in the world.

When someone with $125 billion under management says the technology is ready but the rules are not, it signals that the tokenization conversation has moved well beyond the crypto industry's echo chamber and into the boardrooms of mainstream finance.

What to Watch

The key variable going forward is whether U.S. regulators will create a workable framework for tokenized securities before institutional interest migrates to friendlier jurisdictions.

Congressional action on comprehensive digital asset legislation, SEC guidance on tokenized fund shares, and any pilot programs or no-action letters related to real estate tokenization will be the milestones to monitor.