Tokenized Securities: The Future of Asset Ownership and Transfer (2024)

FAQs

Tokenized Securities: The Future of Asset Ownership and Transfer? ›

Asset tokenization, whereby ownership rights of physical or financial assets are represented and stored as digital tokens on a decentralized digital ledger, has the potential to unlock vast amounts of untapped resources and help democratize financial markets.

A 2022 Boston Consulting Group report estimated that the market for tokenized assets could grow to $16 trillion by 2030, which would greatly enable DeFi protocols catering to these assets to develop entire new financial ecosystems across lending, liquidity pools, futures and derivatives, and other markets.

Tokenization lets you digitally represent asset ownership for any tangible or intangible asset — stocks or bonds, cash or cryptocurrency, data sets or loyalty points — on a blockchain. Once your asset is represented by a token, you can quickly and cost-effectively transfer or trade it, use it as collateral and more.

RWA tokenization converts the rights of diverse assets, from bonds and equity to real estate and cultural assets, into blockchain-based digital tokens. This innovation promises enhanced liquidity, evidence of ownership, and transparency, aimed at democratizing traditionally inaccessible investment avenues.

In addition to digitalization and on-chain storage, tokenization offers more benefits to real estate owners. Blockchain technology improves real-world real estate transactions, streamlines documentation, and enhances security, thus merging the virtual real estate world with the world of cryptocurrencies.

With a 50-fold increase predicted between 2022 and 2030, from US$310 billion to US$16.1 trillion, tokenized assets are expected to make up 10% of global GDP by the end of the decade. The upturn of tokenization is most likely to be associated with non-fungible tokens (NFTs).

1.2 billion USD (2024)

Larry Fink / Net worth

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What is the problem with tokenization? ›

Tokenization is a delicate process, and a number of issues can disrupt it. It could be anything from a network error to a data mismatch. Understanding these challenges is the first step towards addressing and optimizing them.

The security token is the security of the future. European and local authorities now acknowledge that DLT platforms and security tokens can provide clear added value in terms of transparency, efficiency and enhanced reporting/oversight.

According to the BCG report, in a conservative simulation, asset tokenization would reach 16,100 billion by 2030. In the best of all possible worlds, if all the planets were aligned, this market could grow to $68,000 billion.

Asset tokenization has the potential not only to facilitate more efficient transactions, but also to democratize access to certain kinds of investment opportunities and bring more liquidity to traditionally illiquid asset classes, such as real estate and art.

By 2030, tokenization in private markets could reach nearly USD4 trillion in value, an 80x growth rate, according to a Citi forecast. Another report from asset manager Alliance Bernstein estimates that up to 2% of the global money supply could be tokenized over the next five years.

Expanding Investment Opportunities: Tokenization is opening up new avenues for investment beyond traditional assets like real estate, art, and securities. Now, investors can easily access tokenized ownership of intellectual property, commodities, and other assets that were previously difficult to trade.