Tokenization of illiquid assets expected to reach $16T by 2030: Report

By: Ikenna Odunze

Tokenization of illiquid assets expected to reach $16T by 2030: Report

September 14, 2022 7:13 AM

A huge chew of the world's wealth nowadays is locked in illiquid assets, notes the report's authors.

 

According to the Boston Consulting Group, the market value of tokenized illiquid assets, such as real estate and natural resources, could reach $16.1 trillion by 2030. (BCG).

 

BCG CEO Sumit Kumar and ADDX co-founder Darius Liu, among others, wrote in a recent report that "a large chunk of the world's wealth today is locked in illiquid assets."

 

The report lists numerous types of assets that are not easily converted into cash, such as those that have not yet gone public (pre-IPO stocks), property, individual debt, profits from small and medium-sized businesses, works of physical art, rare drinks, private funds, wholesale bonds, and so on.

 

Reasons for this illiquidity include the asset's high price tag (making it unattractive to retail investors), the seller's lack of wealth management experience (making it difficult to sell), the asset's restricted availability (making it inaccessible to the general public, as in the case of fine arts and vintage automobiles), and regulatory obstacles.

 

The market for tokenizing assets on the blockchain, which the report estimates to be worth more than $5.6 billion by 2026, could be the answer to this difficulty.

 

The authors also noted that in just the last two years, the daily trading volume of global digital assets has skyrocketed from €30 billion in 2020 to €150 billion in 2022, and that this amount "is still minuscule compared to the total potential of illiquid tokenizable assets in the world."

 

Financial assets (like insurance policies, pensions, and alternative investments), equity real estate, and other tokenizable assets (like infrastructure projects, vehicle fleets, and patents), will make up the bulk of the $16.1 trillion in tokenization opportunity of on-chain assets that the authors estimate will exist by 2030.

 

 Tokenization of global illiquid assets by 2030. Source: Boston Consulting Group

 

The authors also noted that this is a "very conservative forecast" and that tokenization of illiquid assets globally could reach $68 trillion at best.

 

The potential of tokenized assets will vary from country to country due to different regulatory frameworks and asset class sizes.

 

In Singapore, the Monetary Authority recently launched Project Guardian, a blockchain-based asset pool for tokenization pilot projects that explore decentralized finance (DeFi) applications in wholesale funding markets by establishing a liquidity pool of tokenized bonds and deposits to conduct on-chain lending and lending processes.

 

Besides Singapore, token issuance is in Hong Kong, Japan, the European Union, the United Kingdom, the United States, the United Arab Emirates, Germany, Austria, and Switzerland.

 

Additional authors of the report are BCG Project Leader Rajaram Suresh, Associate Director Bernhard Kronfellner, and
Advisor for BC G Aaditya Kaul, citing

 

“On-chain asset tokenization presents an opportunity to obviate many of these barriers of asset illiquidity as well as the current modality of traditional fractionalization.”

 

Real estate may be among the illiquid assets that could benefit from tokenization as investors seek real-world, asset-backed investments in DeFi.

 

Cointelegraph's research terminal revealed that real estate assets are doing more than 40% of the channel 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 Securities Exchange (ASX) could trade tokenized bonds, stocks, funds or carbon credits after a successful proof of concept.