Tokenized illiquid assets, including real estate and natural resources, may reach $16.1 trillion by 2030.
In a recently released report from BCG and digital exchange for private markets ADDX, authors including BCG MD Sumit Kumar and ADDX co-founder Darius Liu stated that a huge portion of the world's wealth is currently locked in illiquid assets.
According to the report, illiquid assets include pre-IPO equities, real estate, private loans, earnings from small and medium-sized firms, physical art, exotic drinks, private funds, wholesale bonds, and many more
Reasons for asset illiquidity include factors such as limited affordability for mass investors, a lack of wealth management skills, limited access — such as when assets are confined to elite cliques, regulatory impediments, and other circumstances in which users face difficulty in acquiring or trading an asset.
According to the report, on-chain asset tokenization might alleviate this problem, with a market that topped $2.3 billion in 2021 and is predicted to reach $5.6 billion by 2026.
The authors went on to say that in just the last two years, global digital asset daily trade volume has increased from 30 billion euros in 2020 to 150 billion euros in 2022, but that it is still minuscule in relation to the overall global potential of illiquid tokenizable assets.
The authors estimate that by 2030, the on-chain asset tokenization opportunity will be worth $16.1 trillion, with the majority of it made up of financial assets, home equity, and other tokenizable assets.
The authors also noted that this was a "very conservative projection," and that the tokenization of global illiquid assets may reach $68 trillion in the best-case scenario.
However, the potential of tokenized assets will vary by country due to differences in regulatory frameworks and asset class sizes.
The Monetary Authority of Singapore recently launched Project Guardian, a blockchain-based asset tokenization pilot. The project will investigate decentralized finance (DeFi) applications in wholesale funding markets by creating a liquidity pool of tokenized bonds and deposits to carry out borrowing and lending operations on-chain.
In addition to Singapore, token issuance is governed in Hong Kong, Japan, the EU, the UK, the US, the UAE, Germany, Austria, and Switzerland.
Other report authors include BCG project leader Rajaram Suresh, associate director Bernhard Kronfellner, and BCG consultant Aaditya Kaul, who notes:
"On-chain asset tokenization has the potential to eliminate many of the constraints associated with asset illiquidity, as well as the existing mode of traditional fractionalization."
Real estate may be one of the illiquid assets that might benefit from tokenization, with investors in DeFi seeking investments backed by real-world assets.
Earlier this month, after a successful proof-of-concept trial, the digital asset investing platform Zerocap revealed that firms listed on the Australian Securities Exchange (ASX) may be able to trade tokenized bonds, shares, funds, or carbon credits.
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