In a new report titled “From ripples to waves: The transformational power of tokenizing assets,” McKinsey & Company says the tokenized market capitalization across asset classes could reach about $2 trillion by 2030.
This figure, which excludes cryptocurrencies and stablecoins will be driven mainly by a select group of financial assets.
“We expect the most prominent front-runners will include cash and deposits, bonds and ETNs, mutual funds and exchange-traded funds (ETFs), as well as loans and securitization,” said McKinsey.
“Our estimate is exclusive of stablecoins, including tokenized deposits, wholesale stablecoins, and central bank digital currencies (CBDCs) to avoid double counting, as these are often used as the corresponding cash legs in the settlement of trades involving tokenized assets.”
Mutual Funds
According to the report, tokenized money market funds have attracted over $1 billion in assets under management, signaling demand from investors with on-chain capital in a high-interest-rate environment.
The transition to on-chain funds can substantially increase utility, including instant 24/7 settlement and the ability to use tokenized funds as payment vehicles.
As the scope and magnitude of tokenized funds grow, additional product-related and operations benefits will materialize. For instance, highly tailored investment strategies would become possible through composability across hundreds of tokenized assets.
Loans and Securitization
Conventional lending is characterized by labor-intensive processes and high levels of intermediary involvement. Blockchain-enabled lending provides an alternative, with many benefits: live, on-chain data, held in a unified master ledger serving as the single source of truth, fostering transparency and standardization throughout the lending life cycle.
Smart-contract-enabled calculations of payouts and streamlined reporting reduce required cost and labor. Shortened settlement cycles and access to a broader capital pool enable faster transaction flow and potentially lower the cost of capital for borrowers.
Bonds and Exchange Traded Notes
Tokenized bonds with a total notional value exceeding $10 billion have been issued in the past decade, while the total outstanding notional value of bonds worldwide stands at $140 trillion, McKinsey says.
Digital bond issuance will likely continue given the high potential benefits once scaled, as well as comparably low barriers today, partially driven by an appetite to spur capital market development in certain regions. For example, in Thailand and the Philippines, the issuance of tokenized bonds enabled inclusion of small-ticket investors through fractionalization.
According to the report, tokenizing other asset classes will more likely scale only once the foundation has been laid by the aforemntioned asset classes or when a catalyst spurs advancement despite limited evidence for near-term benefits.
You can read the full report by McKinsey and company here.
Follow us on Twitter for the latest posts and updates
Join and interact with our Telegram community
__________________________________________
__________________________________________
