The integration of smart contracts and real-world assets (RWAs) is redefining how value is created, transferred, and secured. From tokenised real estate to digital infrastructure funds, code now governs ownership and cash flow. Yet as the boundaries between blockchain logic and physical law blur, the intersection has become a hotspot for new kinds of risk — technical, legal, and operational.
The Convergence of Code and Concrete
A smart contract is a self-executing program that enforces agreements automatically when conditions are met. When tied to real assets — tangible items like property, commodities, or infrastructure — these contracts create new efficiencies:
Automation: Settlement, escrow, and income distribution can occur instantly.
Fractionalisation: Investors gain access to high-value assets through tokenised shares.
Transparency: Immutable ledgers record ownership history and transaction trails.
This digital-physical bridge promises to unlock trillions in previously illiquid assets. But when code starts dictating the transfer of real-world property, the margin for error narrows — and the consequences become very real.
The Risk Anatomy
1. Code Risk: The Immutability Trap
Smart contracts are software, and software can fail. Bugs, design flaws, and oracle errors can misfire ownership transfers or payments. Once deployed, code is often immutable — meaning a mistake can’t easily be fixed.
For instance, in several DeFi exploits, attackers drained millions by exploiting a single line of logic. Apply that same vulnerability to a tokenised property, and ownership could shift without legal recourse.
2. Legal Disconnect: When Tokens Meet Property Law
Owning a token doesn’t always mean owning the asset. In most jurisdictions, blockchain transfers aren’t yet recognised as legal conveyance of property titles. If a smart contract automatically executes a sale while the legal deed remains unchanged, investors may hold a digital claim with no enforceable rights.
Until laws evolve, tokenisation operates in a legal grey zone — efficient on paper, uncertain in court.
3. Operational and Governance Gaps
Physical assets require management, maintenance, and insurance. Smart contracts automate payments, not plumbing. If the underlying property suffers damage, mismanagement, or regulatory non-compliance, token holders still bear the loss.
Without robust governance frameworks, operational failures in the real world can erode on-chain value.
4. Cyber and Data Integrity Threats
The bridges that connect blockchain to real-world data — known as oracles — are another weak link. If an oracle is compromised, falsified data could trigger unintended payouts or transfers.
Similarly, compromised wallets or governance keys can lead to unauthorised asset control — especially where custodial and code responsibilities overlap.
5. Liquidity and Market Risk
Tokenised assets promise liquidity but often deliver fragmentation. Secondary markets remain thin, and sudden regulatory classification as “securities” can freeze trading. As a result, investors face a mismatch between the theoretical liquidity of tokens and the real-world illiquidity of the underlying asset.
Case Study: REALX Tokenisation in Thailand
In Thailand, the REALX token — backed by three luxury condominium projects developed by Origin Property Public Company Limited in Bangkok — exemplifies how tokenisation operates in the real world.
REALX allows investors to purchase tokens representing rights to rental income and eventual asset sale profits. Each token corresponds to about one square inch of a condo unit. The project was structured under regulatory approval from the Securities and Exchange Commission (Thailand) (SEC Thailand) and listed on the Thai Digital Assets Exchange.
What makes REALX particularly relevant is how it illustrates both promise and exposure: the automation of tokens and returns via smart contract, paired with the physical realities of property ownership, maintenance, and market dynamics. It highlights that even well-structured, regulators-approved tokenised real assets face the underlying risk domains of legal title, data integrity, governance, and liquidity.
Managing the Collision
Bridging digital efficiency with real-world reliability requires layered protection — and this is where insurance becomes critical. Continuum’s specialised coverage stack is designed to address the unique risk profile of tokenised and blockchain-integrated assets:
- Cyber Insurance — Covers data breaches, smart contract exploits, and digital asset theft arising from system vulnerabilities or cyberattacks.
- Professional Indemnity (PI) Insurance — Protects against claims of negligence, misstatement, or errors in structuring and managing tokenised asset offerings.
- Directors & Officers (D&O) Insurance — Safeguards company leadership from legal and regulatory actions linked to governance decisions, mismanagement, or disclosure issues
- Crime Insurance — Covers internal or external fraud, including employee dishonesty, social engineering, or theft of custodial assets.
- Custody Insurance — Protects the safekeeping of tokenised or digital assets under management against loss, theft, or custody failure.
The Way Forward
Smart contracts and real assets represent one of the most powerful financial innovations of this decade — merging programmable efficiency with tangible value. But innovation without control breeds fragility.
As tokenisation accelerates across Asia and beyond, the winners will be those who understand both sides of the equation: that code is powerful, but law is final; automation is efficient, but governance is essential.
At Continuum, we see this convergence not just as a technology play, but as a risk frontier — one where insurance, security, and sound structure must evolve together. Because when smart contracts and real assets collide, the smartest move is knowing how to protect both worlds.
Contact us today to explore tailored insurance, governance and risk transfer solutions that bridge the gap between smart contracts and real-world assets.
