Redemption
Redemption is the process of returning a token or fund share to its issuer in exchange for its underlying value, usually paid in cash or a stablecoin at net asset value.
Redemption is when you hand a token or fund share back to its issuer and receive its underlying value in return - typically cash or a stablecoin, paid out at net asset value. It is one of the two ways out of a position; the other is selling on a secondary market.
For tokenized funds, redemption is the primary exit. You submit a redemption request, the issuer verifies you still pass KYC, the tokens are burned, and the proceeds settle to your wallet or bank. BlackRock's BUIDL and Franklin Templeton's on-chain funds both redeem at NAV, with stablecoin options that can settle in minutes rather than the days a traditional fund takes.
Redemption terms vary and matter a lot. Key details to check: the settlement time (same-day, T+1, or longer), any minimum holding period or lock-up, redemption fees, and minimum or maximum amounts per request. A tokenized Treasury fund may redeem next business day; a tokenized private-credit or real-estate position may only allow redemption on set dates, or not at all until the deal matures.
Redemption is not guaranteed on demand. If the underlying assets are illiquid, an issuer may gate, delay, or suspend redemptions in stress - exactly when holders most want out. That is why a redemption right is only as strong as the liquidity of the assets behind it, and why fast on-chain settlement does not, by itself, make an illiquid asset liquid.
Source: rwa.xyz, as of 2026.
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Educational content, not financial or legal advice.