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 Digital Exchange for Private Markets ADDX, authors including BCG CEO Sumit Kumar and ADDX co-founder Darius Liu found that “a large portion of today’s world wealth is tied up in illiquid assets.”
According to the report, illiquid assets include pre-IPO stocks, real estate, private debt, small and medium-sized business earnings, physical art, exotic beverages, private funds, wholesale bonds and more.
Reasons for this illiquidity of assets are attributed to factors such as limited affordability for mass investors, lack of expertise of asset managers, restricted access, e.g. scenarios where users face difficulties in acquiring or trading an asset.
On-chain asset tokenization could solve this problem, a market that surpassed $2.3 billion in 2021 and is projected to reach $5.6 billion by 2026, according to the report.
The authors added that the daily trading volume for digital assets has increased from €30 billion in 2020 to €150 billion in 2022 in the last two years alone, noting that it is “still tiny compared to the overall potential illiquid tokenizable assets into the world.”
By 2030, the authors predict that the ability to tokenize assets on-chain will reach $16.1 trillion — consisting largely of financial assets (such as insurance policies, annuities, and alternative investments), home equity, and other tokenizable assets such as infrastructure projects. Vehicle fleets and patents.
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 global illiquid assets could reach $68 trillion at best.
However, the potential of tokenized assets will differ 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 tokenization pilot that will explore decentralized finance (DeFi) applications in wholesale funding markets by establishing a liquidity pool of tokenized bonds and deposits to facilitate borrowing carry out credit and lending processes in the chain .
Besides 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.
The report’s other authors include BCG Project Manager Rajaram Suresh, Associate Director Bernhard Kronfellner and BCG Advisor Aaditya Kaul, stating:
“On-chain asset tokenization offers an opportunity to bypass many of these asset illiquidity barriers as well as the current modality of traditional fractionation.”
Real estate is potentially among the illiquid assets that could benefit from tokenization as investors seek investments backed by real assets in DeFi.
Cointelegraph Research Terminal revealed that real estate investments account for more than 40% of the pipeline for certain technology providers, making it one of the main sectors for security token offerings.
Earlier this month, digital asset investment platform Zerocap announced that companies on the Australian Securities Exchange (ASX) could be able to trade tokenized bonds, shares, funds or carbon credits after a successful proof-of-concept test.
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