The total size of tokenized illiquid assets, including real estate and natural resources, could reach $16.1 trillion by 2030, according to the Boston Consulting Group (BCG).
In a newly released report by BCG and the digital exchange for private markets ADDX, the authors, who include the managing director of BCG, Sumit Kumar, and the co-founder of ADDX, Darius Liu, point out that “A large part of the world’s wealth today is locked up in illiquid assets.”
According to the report, among the illiquid assets are pre-IPO stocks, real estate, private debt, small and medium business income, physical art, exotic beverages, private funds, wholesale bonds and many more.
Reasons for this illiquidity of assets are attributed to factors such as limited affordability for mass investors, inexperience of wealth managers, limited access – such as when assets are restricted to elite cliques (in the case of works of art and vintage cars), regulatory obstacles and other scenarios in which users have difficulties in acquiring or negotiating an asset.
On-chain tokenization of assets could solve this problem, a market that exceeded $2.3 billion in 2021 and is expected to reach $5.6 billion in 2026, according to the report.
The authors added that, in just the last two years, the daily trading volume of digital assets globally has skyrocketed from €30 billion in 2020 to €150 billion in 2022, and noted that it “remains miniscule compared to the total potential of illiquid tokenizable assets in the world.”
By 2030, the authors forecast that the on-chain asset tokenization opportunity will reach $16.1 trillion—made up largely of financial assets (such as insurance policies, pensions, and alternative investments), home equity, and other tokenizable assets. , such as infrastructure projects, car fleets and patents.
The authors also noted that it was a “very conservative forecast” and that, in the best of cases, tokenization of global illiquid assets could reach $68 trillion.
However, the potential of tokenized assets will vary across countries due to different regulatory frameworks and the size of asset classes.
In Singapore, the Monetary Authority recently launched Project Guardian, a blockchain-based asset tokenization pilot that will explore decentralized finance (DeFi) applications in wholesale funding markets by establishing a bond liquidity pool. and tokenized deposits to execute on-chain lending and borrowing processes.
In addition to Singapore, token issuance is regulated in Hong Kong, Japan, the European Union, the United Kingdom, the United States, the United Arab Emirates, Germany, Austria, and Switzerland.
Other authors of the report are the BCG project manager, Rajaram Suresh, associate director, Bernhard Kronfellner, and BCG consultant, Aaditya Kaul, which point out:
“On-chain tokenization of assets presents an opportunity to circumvent many of these asset illiquidity barriers, as well as the current mode of traditional fractionation.”
Real estate may be among the illiquid assets that could benefit from tokenization, with investors looking for real-world asset-backed investments in DeFi.
Cointelegraph Research Terminal revealed that real estate assets make up more than 40% of the pipeline for certain technology providers, making it one of the top sectors for security token offerings.
Earlier this month, Digital asset investment platform Zerocap announced that companies on the Australian Stock Exchange (ASX) could trade tokenized bonds, shares, funds or carbon credits following a successful proof of concept.
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