Tokenization Market Could Reach $16 Trillion by 2030, Says Boston Consulting Group

The tokenization industry has seen rapid growth, with new use cases continually emerging. The total size of this sector could reach $16 trillion by 2030, according to Boston Consulting Group. McKinsey, on the other hand, forecasts that the market capitalization of tokenized assets will hit $2 trillion by the end of the decade, potentially reaching $4 trillion in a bullish scenario. This would surpass the current value of all cryptocurrencies and stablecoins in circulation.

Colin Closser, investor relations manager at Exodus, highlighted the potential of blockchain technology to expand participation in equity markets. Exodus, a self-custodial crypto platform, made headlines by becoming the first U.S. company to tokenize its common stock on the Algorand blockchain. The shares are now listed on the premier NYSE American stock exchange, aiming to elevate the company's corporate profile and supercharge liquidity. Closser noted that this move reflects well on both blockchain-based finance and traditional markets.

Asset managers are attracted to tokenization due to its tangible benefits. Blockchains enable 24/7 transactions, reducing settlement times from up to two business days to minutes. Tokenization also helps drive down the costs associated with issuing and trading equities by up to 50%, automating and streamlining backroom processes. One of the biggest benefits of tokenization is its potential to enhance liquidity, especially for assets once considered difficult to buy and sell easily. The Chartered Alternative Investment Analyst Association argued that a rise in fractional ownership could make fine wines and real estate more affordable for a broader cross-section of consumers.

Analysts at Citi believe that the financial sector is only beginning to explore the use cases of tokenization. Ryan Rugg, Head of Digital Assets for Citi’s Treasury and Trade Solutions, argued that the programmability achieved by smart contracts will be especially transformative, enabling payments to be released automatically whenever pre-agreed conditions are met. This could supercharge productivity and efficiency in the financial sector.

Looking ahead, the potential use cases for tokenization extend far beyond stocks. Other asset classes that can benefit from this approach include bonds, commodities, and a slew of other alternative investments. This will help expand participation in equity markets. Closser noted that when U.S. regulations allow on-chain stock trading to flourish, blockchain’s technological underpinnings will upgrade equity markets with 24/7 trading and near-instant settlement. These features are expected by blockchain users, who could in turn gain access to the world of equity ownership.

Exodus marked a milestone in January when it rang the NYSE opening bell, symbolizing how "crypto and traditional markets are coming together to create a more open, transparent, and lasting financial system." Exodus has always harnessed the power of blockchain to democratize finance for consumers, and its pioneering Common Stock Token on Algorand, followed by its uplisting to the NYSE American, is no exception.

However, challenges lie ahead in the ongoing push to take tokenization mainstream. Regulatory clarity is a key sticking point, though progress is being made. The U.S. Securities and Exchange Commission's Crypto Task Force recently hosted a roundtable to discuss the technical standards and safeguards needed for this industry to flourish. For this sector to achieve its full potential, careful thought also needs to be paid to infrastructure, with transactions taking place on blockchains that can scale in line with institutional demand. Recent research indicated that a significant portion of respondents are willing to transfer assets between traditional custodial environments and tokenized platforms, showing healthy demand and a sign that digital and traditional assets will co-exist for years to come.