The total market for tokenized financial instruments, often referred to as real-world assets (RWAs), is projected to soar to $18.9 trillion by 2033, as the technology approaches a pivotal growth stage. This estimation reflects a substantial average compound annual growth rate (CAGR) of 53%, balancing a conservative outlook of $12 trillion in tokenized assets against a more optimistic forecast of $23.4 trillion.
Tokenization involves utilizing blockchain technology to document ownership and facilitate the transfer of assets—such as securities, commodities, and real estate. This sector is experiencing rapid momentum within the cryptocurrency sphere, with numerous traditional financial institutions worldwide exploring tokenization to enhance efficiency, achieve quicker and cheaper settlement times, and enable 24/7 transactions. For instance, JPMorgan’s Kinexys platform has already managed over $1.5 trillion in tokenized transactions, sustaining a daily trading volume exceeding $2 billion. Additionally, BlackRock’s tokenized U.S. dollar money market fund, created in collaboration with a tokenization firm, has approached $2 billion in assets under management and is being increasingly adopted within decentralized finance (DeFi) frameworks.
Organizations and experts indicate that “[the] technology is prepared, regulations are advancing, and foundational use cases are operational,” as stated by a Digital Assets Program Manager. The report mentions the notable success of tokenized government bonds, such as U.S. Treasuries, enabling corporate treasury departments to effortlessly shift surplus cash into these tokenized assets from digital wallets without intermediary involvement, thereby managing liquidity in a timely manner.
The private credit market is gaining traction for its potential to provide access to previously opaque and illiquid markets, offering investors clearer pricing and fractional ownership opportunities. Additionally, carbon markets are identified as promising, where blockchain-based registries could bolster transparency and improve tracking of emission credits.
### Key Challenges Persist
Despite the anticipated growth, the report identifies five significant obstacles to broader adoption: a fragmented infrastructure, limited compatibility across various platforms, inconsistent regulatory developments, varying custody frameworks, and a lack of standardization for smart contracts. Presently, most tokenized assets settle in isolation, with off-chain cash elements diminishing efficiency benefits. The tokenized asset markets face hurdles in unlocking secondary liquidity without unified delivery-versus-payment (DvP) standards.
The regulatory landscape is uneven, with regions like Switzerland, the EU, Singapore, and the UAE crafting comprehensive legal frameworks for tokenized securities, while major markets such as India and China remain more restrictive or vague in their regulatory definitions. This uneven regulatory progress complicates cross-border functionalities and obligates firms to adapt their infrastructure on a market-by-market basis.
Nevertheless, early adopters continue to scale up swiftly. The report outlines three phases of tokenization: initial low-risk adoption of familiar instruments like bonds and funds; progressing into more complex products such as private credit and real estate; and ultimately transforming the market to include illiquid assets like infrastructure and private equity. At present, most companies are situated in either the first or second phase, with scalability largely dependent on regulatory synchronization and infrastructure development.
Costs are becoming increasingly manageable for firms, as evidenced by recent findings. Focused tokenization initiatives can now launch for under $2 million, while comprehensive integrations covering issuance, custody, compliance, and trading may reach up to $100 million for larger institutions.
Tokenization has the potential to facilitate considerable savings for processes like bond issuances, real estate fund tokenization, and collateral management, further stimulating growth.
However, without coordinated, industry-wide efforts, the very silos and fragmentation that tokenization seeks to dismantle could resurface in a digital format, according to a leading expert in financial market infrastructure.