Asset tokenisation is projected to grow by 50 times to a US$16.1 trillion ($22.52 trillion) business opportunity between 2022 and 2030, says global consulting firm BCG and ADDX in a report. The sum is estimated to be around 10% of the globe’s gross domestic product (GDP) by the end of the decade.
“Globally, growth in tokenized assets is expected in real estate, equities, bonds and investment funds, as well as less traditional assets such as car fleets and patents,” say BCG and ADDX.
According to both firms, the growth comes as the crypto winter is “prompting capital to focus on more viable blockchain use cases”.
Asset tokenisation refers to the creation of tokens on a blockchain to represent an asset. The process is made in order to facilitate transactions more efficiently. Many of the world’s assets have historically been held in illiquid formats. These illiquid assets face challenges such as imperfect price discovery and trading discounts compared to liquid assets, the report notes. The tokenisation of such assets will help to create liquidity by making it easier for the assets to be distributed and traded among investors.
In their report, BCG and ADDX write that the projected growth in the tokenisation of assets is said to be driven by demand from a wide range of investors for greater access to private markets. Tokenisation and the fractionalisation of assets lowers barriers for investors in private markets by sharply reducing minimum lot sizes, adds the report.
To be sure, assets that are fractionalised and tokenised on platforms will reduce the minimum investment sizes from millions of dollars to just thousands of dollars. Tokenised investments can also be effectively “borderless”, allowing investors around the world to invest in markets they were previously unable to access, adds the report.
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Further to their report, BCG and ADDX listed several ways that the tokenisation of assets may be on the cusp of wide global adoption.
These include the increased trading volume in tokenised assets, the strengthening stakeholder sentiment across many countries, as well as seeing more recognition among monetary authorities and regulators.
Other signs include the higher number of asset classes being tokenised and a growing pool of active developer talent in the blockchain space.
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“The crypto winter has tightened the purse strings for the overall blockchain sector. Some Web3 companies will be adversely impacted. But projects that can demonstrate inherent value, scalability and the potential to enhance the traditional financial ecosystem could actually benefit against this new backdrop,” says Sumit Kumar, managing director and partner at BCG, Southeast Asia.
“Our analysis shows asset tokenization projects could emerge strongly. They are more likely to demonstrate viability in this capital-constrained environment and are therefore better positioned to attract the attention of investors, who continue to have a significant store of dry powder to deploy,” he adds.
Further to his statement, Kumar notes that the US$16.1 trillion is a “conservative” estimate based on the report’s methodology.
“In a best-case scenario, that estimate goes up to US$68 trillion,” he says.
Choo Oi-Yee, CEO of ADDX says, “Asset prices can only rise to their true economic value if the barriers to investor participation and ownership transfer can be lowered.”
“For years, the technology for overcoming those barriers was expensive and therefore available only on public exchanges. Blockchain changes the game because it can be applied cost effectively to private markets and alternative assets, where investors are fewer in number, albeit wealthier, and products are more bespoke,” she continues.
She adds: “The result should set our hearts racing: assets can be liquid for both public and private markets. The potential economic benefits are considerable. Recognizing assets for what they are truly worth should translate into more investments and better capital allocation, which will in turn generate economic growth and jobs. The real winner here is the real economy.”
