Tokenization of illiquid assets to reach $16 billion by 2030 – Report

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The total size of illiquid tokenized assets, including real estate and natural resources, could reach $16.1 trillion by 2030, according to the Boston Consulting Group (BCG).

In a recently published report by BCG and private marketplaces digital exchange ADDX, authors including BCG Managing Director Sumit Kumar and ADDX co-founder Darius Liu noted that “a large portion of the world’s wealth is now locked up in illiquid assets”.

According to the report, illiquid assets include pre-IPO stocks, real estate, private debt, small and medium-sized business income, physical art, exotic drinks, private funds, wholesale bonds and much more. ‘others.

Reasons for this illiquidity of assets are attributed to factors such as limited affordability for mass investors, lack of wealth management expertise, limited access – such as when assets are restricted to elite cliques (in the case of fine art and vintage cars), regulatory hurdles, and other scenarios where users find it difficult to acquire or trade an asset.

On-chain asset tokenization could solve this problem, a market that surpassed $2.3 billion in 2021 and is expected to reach $5.6 billion by 2026, according to the report.

The authors added that in the past two years alone, the global daily trading volume of digital assets has increased from €30 billion in 2020 to €150 billion in 2022, noting that it “is still tiny compared to the total potential of illiquid tokenized assets in the world.”

By 2030, the authors predict that the on-chain asset tokenization opportunity will reach $16.1 trillion – made up largely of financial assets (such as insurance policies, pensions, and alternative investments) , home equity and other symbolic assets, such as infrastructure projects, car fleets and patents.

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

The authors also noted that this was a “very conservative forecast” and that in a best-case scenario, the tokenization of global illiquid assets could reach $68 trillion.

However, the potential of tokenized assets will differ from country to country due to different regulatory frameworks and sizes of asset classes.

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 execute on-chain borrowing and lending processes.

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

Other authors of the report include BCG Project Manager Rajaram Suresh, Associate Director Bernhard Kronfellner and BCG Consultant Aaditya Kaul, noting:

“Tokenization of on-chain assets provides an opportunity to avoid many of these barriers to asset illiquidity as well as the current traditional splitting modality.”

Real estate may be among the illiquid assets that could benefit from tokenization, with investors seeking investments backed by real-world assets in DeFi.

Cointelegraph Research Terminal revealed that real estate assets make up over 40% of some technology vendors’ pipeline, making it one of the top sectors for security token offerings.

Earlier this month, digital asset investment platform Zerocap announced that firms on the Australian Securities Exchange (ASX) may be able to trade tokenized bonds, stocks, funds or carbon credits. after a successful proof-of-concept trial.