Esmeralda Morales
The report’s authors point out that a large amount of the world’s wealth is currently encapsulated in illiquid assets.
The total value of tokenized illiquid assets, including real estate and raw materials, could reach $16.1 trillion by 2030, according to Boston Consulting Group (BCG).
BCG managing director Sumit Kumar and ADDX co-founder Darius Liu were among the writers of a recently released research from the digital exchange ADDX for BCG and private markets that stated that “a significant amount of the world’s wealth today is locked in illiquid assets.”
Illiquid assets are included in the report as pre-IPO equities, real estate, private loans, small- and medium-sized business income, tangible art, exotic drinks, specialty funds, wholesale bonds, and more.
The lack of knowledge among asset managers, restricted access to assets for elite cliques (in the case of fine art and classic vehicles), legal restrictions, and other considerations are some of the causes of this asset illiquidity. scenarios where users encounter obstacles when acquiring or exchanging a resource.
On-chain asset tokenization, a market that exceeded $2.3 billion in 2021 and is anticipated to reach $5.6 billion by 2026, might, according to the paper, overcome this issue.
The global daily trading volume of digital assets has tripled in just the last two years from €30 billion in 2020 to €150 billion in 2022, which the authors observed is “still very tiny relative to the overall potential of illiquid tokenizable assets in the world.”
The opportunity to tokenize on-chain assets is expected to reach $16.1 trillion by 2030, with the majority of that amount coming from financial assets (such as insurance policies, pension plans, and alternative investments), residential capital, and other tokenizable assets like infrastructure projects. patents and auto fleets.
The authors added that this is a “very conservative estimate” and that the tokenization of all illiquid assets worldwide may, in the best-case scenario, reach $68 trillion.
However, due to different legal environments and asset class sizes, the potential of tokenized assets will vary per nation.
By establishing a liquidity pool of tokenized bonds and deposits to power on-chain borrowing and lending procedures, Project Guardian, a blockchain-based asset tokenization pilot in Singapore, will investigate decentralized finance (DeFi) applications in wholesale finance markets. I started.
Token issuance is governed outside of Singapore in Hong Kong, Japan, the European Union, the United Kingdom, the United States, the United Arab Emirates, Germany, Austria, and Switzerland.
The report’s other writers include BCG advisor Aaditya Kaul, associate director Bernhard Kronfellner, and project head Rajaram Suresh:
Along with the existing conventional approach of sharding, “asset tokenization on-chain presents a potential to circumvent several of these constraints of asset illiquidity.”
As investors look for DeFi investments backed by real-world assets, real estate may be one of the illiquid assets that can profit from tokenization.
Real estate assets account for up 40% of the pipeline for some technology providers, according to The News Research Terminal, making it one of the main sectors for security token launches.
After a successful proof-of-concept trial, companies listed on the Australian Stock Exchange (ASX) will be able to trade tokenized bonds, stocks, funds, or carbon credits, according to a statement made earlier this month by the digital asset investment platform Zerocap.