“Real-World Asset tokenization will grow to become a market worth at least USD 10 trillion by 2030!”
This prediction was made by one of the leading international management consultancies, Roland Berger, in a recent article. The tokenized market will be dominated by digital bonds, investment funds, private equity, public equity, and commodities given the size of the underlying markets and high use case prevalence.
The institutions of these market segments explore tokenization primarily for the following reasons:
Significantly boosting liquidity, accessibility, and transaction speed, resulting in reduced ownership and transaction costs.
Enabling fractional ownership by allowing more people to participate in investment opportunities that were previously inaccessible.
Enhancing security through increased transparency, as tokenized assets are recorded on a blockchain, which provides a transparent and immutable record of ownership.
But asset tokenization is not merely confined to real estate or securities. The universe of eligible assets also includes infrastructure, collectibles & art, entertainment & gaming, and data. Tokenization offers opportunities and potential benefits to virtually everyone, from individual retail investors who previously couldn’t access certain investments to corporations across various sectors that can now easily access the debt markets by issuing digital bonds on-chain.
Five segments of real economy most apt for tokenization:
Financial Services: There seem to be endless tokenization use cases within the Financial Services industry, including services related to investing in tokenized assets such as custody, training, and advisory. Among these, blockchain based payment methods, including stablecoins and tokenized deposits, appear to be the most disruptive.
Real Estate: There is a significant potential in the real estate sector — tokenizing properties creates a new venue for trading real estate, dividing ownership into multiple shares that can be bought and sold with an immediate effect in a liquid market. This has the potential to democratize access to real estate investment, enabling more people to participate and trade properties.
Industrials (incl. Manufacturing, Construction, and Waste Management & Recycling): In the industrial sector, tokenization enables the tracking of the entire product lifecycle, including the recording of vital data such as origin and ownership, thereby optimizing inventory management and response to recalls. Moreover, it contributes to supply chain transparency and supports the development of a circular economy by providing essential data for efficient recycling and waste disposal.
Energy & Utilities: Tokenization in the Energy & Utilities sector streamlines financing and sustainability tracking. For renewable energy projects, it democratizes investment opportunities, enhancing liquidity and transparency. Small investors can directly fund projects, while secondary market trades boost liquidity.
Public Sector: Creating secure digital identities for citizens and streamlining access to government services may be one of the fundamental applications of tokenization. This would enhance the transparency and traceability of government assets, ensuring responsible usage.
To reach mainstream adoption the following key challenges must be solved:
Clear regulatory framework — Clear definitions for different types of digital assets and avoidance of ambiguity and facilitation of regulation compliance.
Stablecoin regulations — One of the regulatory challenges presented by stablecoins arises from their primary objective of maintaining a stable value. To address this challenge, issuers must maintain adequate reserves to back the coins effectively.
Market accessibility — Ensuring that all participants have fair access to the market, in alignment between international rules and local standards for seamless cross-border transactions.
Technology governance — Incorporating standards for system performance, data quality, and data privacy, to ensure secure and reliable technology.
Risk-based approach — Ensuring that regulatory measures are proportionate to the risks arising from digital assets through targeted regulation focused on areas with the highest potential harm.
