Published On: January 17, 2023Categories: Legal0 Comments

Asset Tokenization Market Predictions

The Asset Token Revolution

With tokenization becoming a revolution to the current market, it has been targeted to make a massive impact to the financial market. Tokenization can be said to be the process of converting an asset or the ownership rights of an asset to a unique unit called tokens, although tokenization can conceive to Assets; Real estate, NFTs, Bonds, Utility and investment funds.

Blockchain will tend to the financial landscape and enable an asset to be easily broken down into smaller units, representing ownership, encouraging the democratization of investment in historically illiquid assets and bring about fairer markets. Whether it be paintings, digital media platforms, real-estate property, company shares, or collectibles, everything can be tokenized on a distributed ledger.

Asset tokenization in relation to the current market is the process by which an issuer (corporations, financial institutions, investment trusts, or domestic or foreign government) creates digital tokens on a distributed ledger or blockchain, which represent either digital or physical assets. Blockchain guarantees that once you buy tokens representing an asset, no single authority can erase or change your ownership — your ownership of that asset remains entirely immutable.

Boston Consulting Group Prediction

A Global consulting firm BCG (Boston Consulting Group) and ADDX, the digital exchange for private markets, recently published a report late last year pertaining to Asset tokenization, forecasts that its growth will expand into as much as US$16.1 trillion business opportunity by 2030.

The report by BCG and ADDX lists five indications that asset tokenization may be on the peak of wide global adoption:

# Increased trading volume in tokenized assets
# Strengthening stakeholder sentiment across many countries
# Recognition among monetary authorities and regulators
# More asset classes being tokenized1
# A growing pool of active developer talent in the blockchain space

Boston Consulting Group Prediction

With worldwide reference, growth in tokenized assets is pertains to real estate, equities, bonds and investment funds, as well as less traditional assets such as car fleets and patents. With a 50-fold increase predicted between 2022 and 2030, from US$310 billion to US$16.1 trillion, tokenized assets are expected to make up 10% of global GDP by the end of the decade.

The upturn of tokenization is most likely to be associated with non-fungible tokens (NFTs). Unlike cryptocurrencies such as bitcoin, which are identical units that can be exchanged and are therefore fungible, NFTs are not interchangeable. Each NFT is a unique token on a blockchain which stores information about provenance that can be traced back to the original issuer; therefore it provides collectors with the opportunity of building a digital collection. For this reason, NFTs are popular in applications which require unique digital items, including crypto art, digital collectibles and online gaming, where some guarantee of authenticity and ownership history adds value.

Industry leading Predictions

BCG’s project leader Rajaram Suresh, associate director Bernhard Kronfellner and consultant for BCG Aaditya Kaul, noted:

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.

Sumit Kumar, Managing Director and Partner, BCG South East Asia, said:

The crypto winter has tightened the purse strings for the overall blockchain sector. Some Web3 companies will be adversely impacted. But projects that can demonstrate inherent value, scalability and the potential to enhance the traditional financial ecosystem could actually benefit against this new backdrop. Our analysis shows asset tokenization projects could emerge strongly. 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.

Oi-Yee Choo, CEO, ADDX, said:

Asset prices can only rise to their true economic value if the barriers to investor participation and ownership transfer can be lowered. For years, the technology for overcoming those barriers was expensive and therefore available only on public exchanges. Blockchain changes the game because it can be applied cost effectively to private markets and alternative assets, where investors are fewer in number, albeit wealthier, and products are more bespoke. The result should set our hearts racing: assets can be liquid for both public and private markets. The potential economic benefits are considerable. Recognizing assets for what they are truly worth should translate into more investments and better capital allocation, which will in turn generate economic growth and jobs. The real winner here is the real economy.

Major institutions have already begun to tokenize private funds on ADDX’s platform as real estate may be among the illiquid assets that could benefit from tokenization, with investors looking for investments backed by real-world assets in DeFi.

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