Tokenized Financial Assets Projected to Reach $2 Trillion by 2030, McKinsey Predicts
Summary:
Despite a slow start, tokenized financial assets are expected to hit a market value of around $2 trillion by 2030, possibly reaching $4 trillion in a bullish scenario, according to McKinsey analysts. The team noted considerable progress in tokenization, but acknowledged that widespread adoption remains a distant goal due to regulatory and infrastructural challenges in financial services. Precursors to substantial adoption will likely be cash and deposits, bonds, ETNs, mutual funds, ETFs, loans, and securitization. Meanwhile, derivatives and stocks may be less likely to witness wide tokenization.
Despite a sluggish inception, tokenized financial assets are projected to surge to a market value of roughly $2 trillion by 2030, according to industry experts at consulting powerhouse, McKinsey & Company. They speculate that in an optimally performing scenario, this estimated value could potentially skyrocket to approximately $4 trillion, by the same year. Despite this, they confess to lower expectations compared to earlier predictions.
The consultants at McKinsey perceive an upward trend in the domain of tokenization, however, they regard widespread adoption as a distant goal due to the hurdles in modernizing the existing financial architecture, particularly in a highly regulated sector such as financial services.
They anticipate that cash and deposits, bonds, exchange-traded notes (ETNs), mutual funds, and exchange-traded funds (ETFs), loans, and securitization will be the first categories to achieve substantial adoption, and collectively account for $100 billion of the tokenized market cap by 2030. Conversely, derivatives and stocks are predicted to experience the least amount of extensive tokenization.
Excluded from these estimations were stablecoins, tokenized deposits, and central bank digital currencies (CBDCs).
The McKinsey team explained the challenges tokenization currently faces, specifically, the standard "cold start" issue, where the value of tokenized items is contingent upon user participation. Initial limitations, such as restricted liquidity, often discourage tokenized issuances. Additionally, fear of market share loss may precipitate tokenized assets to simultaneously issue via traditional technology.
According to the analysts, tokenization requires cases where it displays substantial advantages over conventional finance systems. They cited tokenized bonds as an example. McKinsey analysts report weekly announcements of new tokenized bond issuances, but while billions of dollars' worth of tokenized bonds are in circulation, the advantages over traditional issuance are negligible, and secondary trading is infrequent.
By enhancing mobility, expediting settlements, and boosting liquidity, they believe that the slow uptake could be countered. The experts also predict that early adopters, who master the tokenization surge, could capture an outsized market share, potentially influence standards, and enhance their reputation.
However, numerous institutions remain in an observatory state. Indications of a tipping point in tokenization would include blockchains capable of supporting trillions of dollars in volume and seamless connectivity. Regulatory advancements providing clarity on data access and security will also be significant indicators.
Published At
6/24/2024 5:07:18 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.