Tokenization could be a $5 trillion opportunity led by stablecoins and CBDCs: Bernstein

The benefits of tokenization are simple, the process brings operational efficiencies as well as improved liquidity and accessibility, Bernstein said in a research note on Tuesday.

Tokenization is the process of converting real-world assets into blockchain-based tokens.

Bernstein estimates that the tokenization opportunity could be as high as $5 trillion over the next five years, led by stablecoins and central bank digital currencies (CBDC), private market funds, securities and real estate.

Tokenization of currencies via stablecoins and central bank digital currencies will apply to on-chain deposits and payments, the report said. Over the next five years, about 2% of the global money supply is expected to be tokenized, equivalent to about $3 trillion, the report added.

“Over the next five years, we expect an increase in stablecoins and CBDC tokens in circulation, led by China’s CBDC program,” analysts led by Gautam Chhugani wrote. “Stablecoins and CBDC tokens, coupled with yield farming in decentralized markets, will compete with bank deposits as an investment or savings vehicle,” the analysts wrote.

Nevertheless, the broker points out the current regulatory uncertainty and says that “tokenization using blockchain can only be successful if policymakers recognize the benefits of blockchains and recognize that crypto tokens are an indispensable part of blockchain operations. “

“The way policymakers regulate blockchain-based companies will determine how they view the tokenization of real-world assets,” the note said, adding that “regulations could mitigate the benefits of tokenization.”

Read more: Regulatory uncertainty in crypto market overshadows blockchain development: Bank of America

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