A newly-published report by global consulting firm BCG and ADDX, a digital exchange for private markets, forecasts that asset tokenisation will expand into a$16.1 trillion business opportunity by 2030. This growth comes as the crypto winter is prompting capital to focus on more viable blockchain use cases.
The projected growth in tokenisation of assets is driven by demand from a wide range of investors for greater access to private markets. Tokenisation and fractionalisation of assets lower barriers to investment in private markets by sharply reducing minimum lot sizes.
Assets being fractionalised and tokenised on platforms such as ADDX can reduce minimum investment sizes from millions of dollars to just thousands of dollars. Previously investments of this kind were only available to institutions. Tokenised investments can also be effectively ‘borderless’, allowing investors around the world to invest in markets they were previously unable to access.
Asset tokenisation refers to the creation of tokens on a blockchain to represent an asset, in order to facilitate more efficient transactions. Historically, many of the world’s assets have been held in illiquid formats, with past studies estimating the share of illiquid assets at more than 50% of overall assets. Illiquid assets face challenges such as imperfect price discovery and trading discounts compared to liquid assets, the report said. Tokenisation creates liquidity by making it easier for the assets to be distributed and traded among investors.
The report by BCG and ADDX lists five indications that asset tokenisation may be on the cusp of wide global adoption: increased trading volume in tokenised assets; strengthening stakeholder sentiment across many countries; recognition among monetary authorities and regulators; more asset classes being tokenised; and a growing pool of active developer talent in the blockchain space.
Major institutions have already begun to tokenise private funds on ADDX’s platform. Partners Group listed its Global Value SICAV Fund on the platform in September 2021, while Hamilton Lane’s Global Private Assets Fund launched on the platform in March 2022.
Globally, growth in tokenised assets is expected in real estate, equities, bonds and investment funds, as well as less traditional assets such as car fleets and patents. With a 50-fold increase predicted between 2022 and 2030, from $310 billion to $16.1 trillion, tokenised assets are expected to make up 10% of global GDP by the end of the decade.
While the concept of asset fractionalisation has been around for some time, its impact has hitherto been felt mainly in the public markets, with structures such as fractional shares, ETFs[v] and public REITs[vi]. In recent years, there has been a significant pivot with the emergence of asset tokenisation players that apply blockchain technology to private markets and alternative assets.
Titled “Relevance of on-chain asset tokenisation in ‘crypto winter’”[vii], the new report was authored by Sumit Kumar, Rajaram Suresh, Bernhard Kronfellner, and Aaditya Kaul from global management consultancy firm BCG and Darius Liu from private market exchange ADDX.