Today Standard Chartered and Synpulse released a report on tokenized real world assets (RWA) with a particular focus on trade finance. They estimate the tokenization market will reach $30.1 trillion within ten years, with trade finance making up 16% or $4.8 trillion. The segment will be amongst the top three classes of tokenized assets globally.
The so-called trade finance gap is $2.5 trillion, representing slightly more than 10% of the global merchandise trade of $24 trillion in 2023. However, the bank observes that only 80% of the export market is currently financed, so there could be another 10% undisclosed trade finance gap. In that case, the gap is closer to $5 trillion and growing, given global trade is forecast to reach $32.6 trillion by 2030.
As an investable asset class, trade finance is attractive. Default rates are typically a fraction of one percent. Even in default cases, the recovery rates are high – close to two thirds or almost 100% where there’s a guarantee. Standard Chartered made the case for the ongoing role of banks from a trust perspective. They have a point. Some of the credit advanced against trade finance in the DeFi world has experienced higher default rates.
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