A new report from Boston Consulting Group (BCG) and ADDX estimates that asset tokenization will reach $16 trillion by 2030, or 10% of global GDP. To put that figure in context, in 2020, the total assets under management for ETFs were $7 trillion (Source BIS), and total real estate investment trust (REITs) were worth $2.5 trillion in 2021 (Source Nareit).
Asset tokenization refers to using blockchain to create tokens for financial and real world assets ranging from equity, bonds and funds to art, real estate, commodities and patents.
The report said the current figure for security tokens was $310 billion. When we asked ADDX for details about what was included, they mentioned the range of assets above and added insurance policies, pension, alternatives investments, infrastructure projects, car fleets and patents.
Many current tokenization platforms are not public. For example, there are some significant blockchain and tokenization projects targeted purely at trading, such as the separate repo platforms from Broadridge and JP Morgan that transact tens of billions of trades weekly. Similarly, Baton Systems runs a number of DLT (but not token) platforms that settle tens of billions of dollars, but that is post-trade only.
BCG points to the crypto winter favoring blockchain tokenization. “Our analysis shows asset tokenization projects could emerge strongly,” said Sumit Kumar, Managing Director and Partner, BCG South East Asia.
“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. This report projects that even using a conservative methodology, asset tokenization would be a US$16.1 trillion business opportunity by 2030. In a best-case scenario, that estimate goes up to US$68 trillion.”
Tokenization is seen as addressing the relative illiquidity of many assets today. The causes for the limited marketability are cited as
- high ticket sizes, whereas tokens can be fractionalized
- inability to fractionalize some assets, such as a house
- lack of data for valuation
- limited access
- regulatory hurdles
- complex user journeys.
ADDX (formerly iSTOX) is a Singapore-regulated exchange for security tokens. It recently raised $58 million in funding, including from the Thai stock exchange SET, bringing its total backing to more than $120 million. One of its highest profile tokenizations was when it partnered with UOB bank for a $100 million bond for Singtel.