Prominent investment bank Citi is ready to bank on what it calls a “killer use case” of crypto. As per Citi’s foresight, the market for blockchain-based tokenization of real-life assets would touch the $4 trillion to $5 trillion mark by 2030.
If Citi’s estimates hold through the test of time, that would be an “80-fold” rise from the value of tokenized real-world assets, as per Citi’s “Money, Tokens and Games” March report. Citi also predicts the private equity market to lead the “tokenized” asset class as it is highly liquid and possible to be fractionalized.
Citi analysts state, We forecast $4 trillion to $5 trillion of tokenized digital securities and $1 trillion of distributed ledger technology (DLT)-based trade finance volumes by 2030.
With the total tokenized value of $5 trillion, $1.9 trillion would be debt, and $1.5 trillion would be real estate. While $0.7 trillion would be private equity and venture capital, securities would claim a share in the $0.5-1 trillion range, Citi estimates.
Source: Citi
Citi predicts private equity and venture capital funds would have 10% of its total addressable market getting captured in asset tokenization.
Source: Citi
The arguments put forward by Citi include blockchain tokenization making costly reconciliation and settlement failures obsolete. It also increases operational efficiency, Citi notes.
Citi’s report states, What DLT and tokenization offer is an entirely new tech stack that lets all stakeholders do all activities on the same shared infrastructure as one golden source of data — no more expensive reconciliation,
settlement failures, waiting for the faxed documents or ‘originals to follow’ by post, or investment choices being restricted by operational difficulty in access.
Citi also flags certain lacunas, such as the absence of a legal and regulatory framework, infrastructure building bottlenecks, and no interoperability standards.
The “end state” Citi predicts is adigitally native financial asset infrastructure, globally accessible, operating 24x7x365 and optimized with smart contract and DLT-enabled automation capabilities, which enable use cases impractical with traditional infrastructure.
