- The concept of tokenisation is grabbing ever-more mindshare among institutions.
- Its applicability will propel it “exponentially,” wrote Ripple and the Boston Consulting Group.
The market for tokenised assets is set to grow “exponentially,” from a current estimated size of $600 billion to a predicted $19 trillion over the next eight years.
That’s according to a new report, “Approaching the Tokenisation Tipping Point,” released Monday by Ripple, the cross-border payments company that developed the XRP token, and global management consulting firm Boston Consulting Group.
“For financial institutions, tokenisation is no longer a side project. It is increasingly emerging as a strategic path and a likely next step in the evolution of finance,” the report reads.
Tokenisation is the process of representing so-called real-world assets — like traditional equities and shares of ownership in real estate — on a blockchain in the form of tokens.
Large institutional players are bullish on the concept.
Larry Fink, CEO of BlackRock, said two years ago that “the tokenisation of asset classes offers the prospect of driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors.”
A year later, BlackRock launched BUIDL, its tokenised money market fund, which has drawn in over $1 billion.
Other players like Deloitte, Franklin Templeton and JP Morgan are among other majors exploring tokenisation. As far back as 2017, firms experimented putting various financial instruments on blockchains.
A confluence of tailwinds will bring tokenised assets to that eye-watering $19 trillion market capitalisation, Ripple and BCG write.
Among them are the efficiencies of tokens, including faster settlement and lower transaction costs, which could streamline industries like real estate — which they predict to be worth $1.5 trillion onchain by 2033 — and venture capital.
Ripple and BCG’s report also cited the “twin flywheels” of tokenisation adoption: businesses improving their onchain products and consumers purchasing those products, encouraging more consumers into doing the same, and thus driving further institutional interest in tokenisation.
“So far, there is limited interlinkage between tokenisation in the financial industry and tokenisation in crypto,” Yue Hong Zhang, managing director and partner at BCG Hong Kong, said in the report.
“With the recent growth of real-world assets, people outside the crypto industry are increasingly asking about the potential of tokenised assets to address historically under-penetrated segments. Global adoption is poised to grow exponentially.”
Andrew Flanagan is a markets correspondent for DL News. Have a tip? Reach out to aflanagan@dlnews.com.
