Tokenization, the process of creating a unique digital representation of an asset on a blockchain network, offers many benefits for the financial system: it’s efficient, transparent, and secure. Partner Anutosh Banerjee and colleagues predict that tokenization will likely occur in waves, beginning with asset classes that are technically and regulatorily feasible and where efficiency and value gains are relatively large. These include cash and deposits, mutual funds and exchange-traded funds, loans and securitization, and bonds and exchange-traded notes.
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A proportional area chart shows an incremental breakdown of the potential value of tokenized assets by 2030. The chart is divided into 3 waves, each representing different asset classes. Cash and deposits, which have the largest expected potential value at ~$1.1 trillion, are excluded from them. Wave 1 represents the most mature asset classes, which are expected to be tokenized first. Mutual funds and exchange-traded funds (ETFs) are expected to have a potential value of ~$0.4 trillion. Loans and securitization, and bonds and exchange-traded notes each have an expected value of ~$0.3 trillion. Wave 2 represents asset classes that are likely to be tokenized later. Alternative funds have an expected value of ~$0.2 trillion, while alternative assets, unlisted equities, and precious metals each have an expected value of ~$0.1 trillion. Wave 3 represents the least mature asset classes. Publicly listed equities, intangible assets, and derivatives each have an expected value of <$0.1 trillion. The total value of tokenized assets by 2030 is expected to be ~$3.0 trillion.
Source: Bank for International Settlements; Dealogic; expert interviews; Federal Reserve Bank of St. Louis; Preqin, Savills; Statista; The Block; WFE.
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To read the article, see “From ripples to waves: The transformational power of tokenizing assets,” June 20, 2024.