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Tokenization of real-world assets: unlocking a new era of ownership, trading, and investment

Tokenization of real-world assets: unlocking a new era of ownership, trading, and investment

October 13, 2023

$10 trillion future: how tokenization is redefining asset management and industry operations

Tokenization will revolutionize the way we fund, trade, and manage assets. It is expected to disrupt nearly every industry and sector of our modern society – from investing and asset management, through manufacturing to real estate or even art. We conservatively estimate that the total market value of tokenized assets will significantly exceed USD 10 trillion by 2030. In this article, we lay out the basics of tokenization, share our view on the main use cases, as well as discuss what you need to consider for your business.

Tokenization
"The tokenization of real-world assets isn't a thing of the future; it's happening now. We estimate that the total market for tokenization by conservative estimates will significantly exceed USD 10 trillion by 2030."
Portrait of Pierre Samaties
Partner
Dubai Office, Middle East

What is tokenization?

Tokenization promises to redefine asset ownership and investment and we might just be on the cusp of a major breakthrough in its global adoption . The technology may radically overhaul traditional frameworks of investment and ownership, significantly lowering transaction costs, bringing transparency and greater liquidity into the equation. In broadening access to investments, we are not merely changing how we view property, commodities, and value, but how we interact with these crucial elements of our economic systems. The tokenization of real-world assets isn't a thing of the future; it's happening now. And it's setting the stage for a financial ecosystem where digital tokens stand for real-world assets, making them more accessible than ever before – not only to the privileged or institutional investors, but to the public at large.

Asset universe eligible for tokenization is not limited to equity shares or bonds only

What, then, is the best way to define tokenization? The term 'token' has a long history (predating digital technology) with varying connotations and definitions, which sometimes make it difficult to pin down the exact meaning. In the context of this report, a token represents an asset in digital form , combined with information and assignable digital rights, all of which are connected in a programmable and automated manner. Tokens can represent either tangible physical assets or intangible assets—they can represent a share or the entire asset. It could be anything, from real estate, company shares, bonds, or even a work of art. The token, existing on the blockchain , represents ownership of this asset. This way, assets that were previously hard to divide or trade can now be easily managed and transacted.

According to the World Bank, as many as 1.7 billion people do not currently have access to financial services. This means that they do not have a bank account, credit card, or other financial products that allow them to save, borrow, or invest money. This lack of access to financial services can have several negative consequences, leading to overall increased vulnerability to poverty and financial hardship.

Tokenization can be one of the solutions for this problem, as it enables access to investments for many people who are currently unbanked by reducing barriers to entry. Previously illiquid assets, as well as assets that historically had high investing thresholds (e.g., private equity funds) are becoming more accessible through breaking them into pieces (fractionalization) and making them accessible beyond borders (where they are located or traded).

Tokenization not only expands opportunities that were once limited by geographical or financial constraints but also enhances the accuracy and timeliness of asset pricing. Assets that were previously illiquid now experience increased trading activity. Moreover, institutions explore tokenization primarily for the following reasons:

  1. Significantly boosting liquidity, accessibility, and transaction speed, resulting in reduced ownership and transaction costs.
  2. Enabling fractional ownership by allowing more people to participate in investment opportunities that were previously inaccessible.
  3. Enhancing security through increased transparency, as tokenized assets are recorded on a blockchain, which provides a transparent and immutable record of ownership

A 10+ trillion-dollar market opportunity

We firmly believe that asset tokenization will grow to become a market worth at least USD 10 trillion by 2030, representing a 40-fold increase in the value of tokenized assets from 2022 to 2030. This would mark a significant rise from the current value of around USD 300 billion. Our estimate of the market size is based on our proprietary analysis:

  • we collected current data on market values across public and private equity, debt, real estate, and other asset categories relevant for tokenization; and
  • we have applied conservative growth rates going forward (from 2% to 8%) for asset values and multiplying these by a share (%) likely to be tokenized (up to 1%)

Real estate and financial assets (including equities, bonds, investment funds) are likely to dominate the tokenized market due to the sheer size of the underlying markets and the high prevalence of use cases.

Value of tokenized assets will reach at least USD 10.9 trillion by 2030

How can you start your tokenization journey?

Embarking on your tokenization journey is no different than taking the first step of any major endeavor. We propose initiating our collaboration by offering you a tokenizationreadiness workshop, designed to assess and identify the initial tokenization potential within your organization. Following this assessment, Roland Berger can provide comprehensive support in the development of a robust tokenization strategy and the execution of relevant use cases.

We partner with leading tokenization technology providers across numerous jurisdictions, ensuring that the chosen technology aligns seamlessly with your unique use case roadmap. It's important to note that the tokenization journey is not a winner takes all situation, but rather an arena where the first mover often enjoys a substantial advantage.

Reach out to us today to start your journey and get ahead of the competition.

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Tokenization of real-world assets: unlocking a new era of ownership, trading, and investment

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Tokenization to reshape asset funding, trading & management, impacting all sectors. Market value may surpass $10tn by 2030. This article discusses basics, uses & business considerations.

Published October 2023. Available in
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