The value of illiquid assets that could be tokenised worldwide could grow to $16 trillion by 2030 –equivalent to 10% of global GDP, according to a new report released last week by private market exchange, ADDX, and Boston Consulting Group (BCG).
This figure, which BCG forecasted based on current and projected asset tokenisation adoption rates, will vary depending on a number of components. These include whether regulators might move to allow or introduce regulation promoting asset tokenisation; investors’ openness to and acceptance of tokenisation; the availability of service providers that enable tokenisation; and trading volumes of tokenised assets.
In a “best-case scenario,” i.e., if all relevant factors pan out favourably and tokenisation growth experiences maximum momentum, the potential of asset tokenisation could grow to be worth up to $68 trillion by 2030, Oi-Yee Choo, CEO of ADDX told FinanceAsia.
Client investors are increasingly demanding more access to private markets, while the crash in cryptocurrency prices and the rise in regulatory uncertainty is channelling venture capital towards more viable blockchain initiatives, such as blockchain-based asset tokenisation, the report claims. Both of these elements are contributing to the development of the tokenisation ecosystem.
Recent examples of tokenisation gaining traction include activity by US private equity firm, KKR, to partially tokenise a $4 billion tech fund via the ADDX platform in May this year, and JP Morgan’s investment into tokenisation platform, Ownera, last week.
In May, the Monetary Authority of Singapore (MAS) launched Project Guardian, an initiative to explore the benefits and use cases of asset tokenisation.
Singapore-based ADDX, which is backed by Hamilton Lane, Krungsri Finnovate and UOB, among others, has to date listed close to 40 private market deals, of which more than half are funds. The remainder are bonds, equity-linked and structured products.
“In the first half of 2022, our investor base grew by over 100% compared with the same period in 2021,” Choo shared.
Tokenisation allows investors to enter opportunities at a lower minimum threshold, in turn “democratising” investment and offering issuers access to a wider pool of capital.
But barriers to the further growth of tokenisation include differing regulatory stances, which make it difficult for it to gain scale across borders. Additionally, some individual and institutional investors equate tokenisation with crypto, hindering broader acceptance, the report found.
However, Choo sees a “marked improvement” in general levels of understanding since 2021, due to increased investor education.
“When investors are able to distinguish between tokenisation and crypto, they are in a better position to make investment decisions that are nuanced, calibrated and not broad-brush in nature,” she said. She also sees clearer regulations in the tokenisation space emerging, albeit at a different pace across jurisdictions.
“We are optimistic about both the speed and direction of change, regionally and globally,” she added.