The total size of tokenized illiquid assets, including real estate and natural resources, could reach $16.1 trillion by 2030, according to Boston Consulting Group (BCG).
In new released report from BCG and private markets digital exchange ADDX, authors including BCG CEO Sumit Kumar and ADDX co-founder Darius Liu noted that “much of the world’s wealth today is locked up in illiquid assets.”
According to the report, illiquid assets include pre-IPO stocks, real estate, private debt, SME proceeds, physical art, exotic beverages, private funds, wholesale bonds and many others.
Reasons for this illiquidity of assets are attributed to factors such as limited affordability for mass investors, lack of asset manager expertise, limited access – for example when assets are limited to elite cliques (in the case of fine arts and veterans), regulatory hurdles, and other scenarios. in which users have difficulty acquiring or trading the asset.
This problem could be solved by the tokenization of on-chain assets, 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 grown from €30 billion in 2020 to €150 billion in 2022, noting that “it is still tiny compared to the total potential of illiquid tokenizable assets in the world .”
By 2030, the authors predict that the opportunity to tokenize on-chain assets will reach $16.1 trillion – made up mostly of financial assets (such as insurance, pensions and alternative investments), home equity and other tokenizable assets such as infrastructure projects, fleets and patents.
The authors also noted that this is a “highly conservative forecast” and that, at best, the tokenization of global illiquid assets could reach $68 trillion.
However, the potential of tokenized assets will vary across countries due to different regulatory frameworks and asset class sizes.
In Singapore, the Monetary Authority recently launched Project Guardian, a blockchain-based asset tokenization pilot project that will explore decentralized finance (DeFi) applications in wholesale funding markets by creating a liquidity pool of tokenized bonds and deposits to perform on-chain borrowing and lending processes.
In addition to Singapore, token issuance is regulated in Hong Kong, Japan, the European Union, the United Kingdom, the United States, the United Arab Emirates, Germany, Austria, and Switzerland.
Other authors on the report include BCG project leader Rajaram Suresh, associate director Bernhard Kronfellner and BCG consultant Aaditya Kaul, noting:
“On-chain asset tokenization presents an opportunity to avoid many of these barriers of asset illiquidity as well as the current modality of traditional fractionalization.”
Real estate may be among the illiquid assets that could benefit from tokenization, with investors looking for real asset-backed investments in DeFi.
Cointelegraph Research Terminal exposed that real estate assets account for more than 40% of the inventory for certain technology providers, making them one of the primary sectors for security token offerings.
Earlier this month, digital asset investment platform Zerocap he announced that Australian Stock Exchange (ASX) companies could be able to trade tokenized bonds, shares, funds or carbon credits after a successful proof-of-concept.