The tokenization of real-world assets (RWA) is set to transform asset management, potentially reaching $600 billion in assets under management by 2030.
In an October 29 report, global consulting firm Boston Consulting Group (BCG) labeled RWA tokenization as “the third revolution in asset management.”
In collaboration with Aptos Labs and Invesco, BCG projects that tokenized assets could make up 1% of all global mutual funds and exchange-traded funds (ETFs) within seven years.
Investor Demand in Tokenized Funds Increase
“We see a pattern of growing investor demand in the tokenized funds space,” remarked David Chan, Managing Director and Partner at BCG.
According to their findings, the RWA tokenization market may expand by up to 50 times by the end of the decade.
BCG attributes this surge to an increasing presence of regulated on-chain currencies, including stablecoins, tokenized deposits, and central bank digital currencies (CBDCs).
Such currencies are expected to encourage investors to further explore tokenized investment options, providing a regulated, blockchain-based approach to traditional financial products.
State Street Global Advisors, a major player in asset management, also released an October report on RWA tokenization, highlighting the bond market as especially primed for blockchain adoption.
The report explains that bonds possess characteristics that make them suitable for tokenization: recurring issuance costs, intricate structures that can benefit from automation through smart contracts, and a strong need for efficient collateral transfers.
“The bond market is ripe for adoption,” State Street researchers wrote, noting that the use of blockchain could significantly reduce the costs associated with issuing and managing bonds.
The authors, Elliot Hentov and Vladimir Gorshkov, suggest that high-velocity markets, such as repos and swaps, could greatly benefit from blockchain’s ability to streamline transactions.
Beyond bonds, other asset types such as private equity show high potential for tokenization, although public equities may face fewer incentives for adopting this technology due to existing, efficient systems.
The tokenization of real estate and private equity presents additional challenges, often due to complex regulations and the need for technological infrastructure.
RWA Tokenization Sector is Growing Despite Slow Adoption
The Financial Stability Board also weighed in on the potential of RWA tokenization, reporting that while adoption rates are currently low, the sector is growing.
Most tokenization initiatives are seen in government debt, equity stakes, and commodities.
As of October, the value of tokenized RWAs is reported to be $13.25 billion, up 60% this year, according to data analytics platform rwa.xyz.
Earlier this month, a report by Tren Finance claimed that the RWA tokenization market is set for a 50-fold expansion by 2030.
Even more conservative estimates from Citigroup suggest that $4 trillion to $5 trillion worth of tokenized digital securities could be minted by 2030.
Recognizing this potential, major companies are making significant moves in the tokenization space.
Goldman Sachs, for instance, plans to launch three new tokenization products later this year, driven by growing client interest.
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