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:
- 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
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.