Asset Tokenization To Reach $2 Trillion by 2030

Tokenized financial assets initially experienced a "cold start" but are projected to attain a market size of approximately $2 trillion by 2030, according to analysts from McKinsey & Company.

"In a bullish scenario, this value could double to around $4 trillion," the analysts noted on June 20, acknowledging they were "less optimistic than previously."

There is "visible momentum" in tokenization, say McKinsey's analysts, although widespread adoption remains distant due to the challenges of modernizing current financial infrastructure in a heavily regulated sector like financial services.

They anticipate that categories such as cash and deposits, bonds and exchange-traded notes (ETNs), mutual funds and exchange-traded funds (ETFs), loans, and securitization will achieve "meaningful adoption" first—indicating a tokenized market capitalization of $100 billion by 2030.

The estimation by the analysts does not include stablecoins, tokenized deposits, or central bank digital currencies (CBDCs).

They highlighted the typical "cold start problem" for tokenization, where the value for users is necessary for tokenized assets.

Tokenization is hindered by limited liquidity and concerns over market share loss, often resulting in a "parallel issuance on legacy technology."

There is a need for a practical application of tokenization that provides an advantage over existing financial systems, the analysts pointed out.

"One such example is the tokenization of bonds. Barely a week goes by without the announcement of a new tokenized bond issuance," they reported.

Despite billions of dollars in tokenized bonds currently outstanding, the advantages over traditional methods are slight, and secondary trading is infrequent.

To overcome the initial sluggishness, the analysts suggest enhancements like "greater mobility, faster settlement, and more liquidity."

Early adopters of tokenization might gain a significant market share and influence over standards, improving their reputation in the process.

"However, many more institutions are in 'wait and see' mode," they commented.

The analysts also identified several indicators of when tokenization might reach a critical juncture, including blockchain capabilities for handling trillions in volume, improved blockchain interoperability, and regulatory clarity on data access and security.

Sources:

https://cointelegraph.com/news/asset-tokenization-rwa-2-trillion-2030-mckinsey

https://www.mckinsey.com/industries/financial-services/our-insights/from-ripples-to-waves-the-transformational-power-of-tokenizing-assets