Tokenized financial assets have experienced a slow start but are projected to reach a market size of around $2 trillion by 2030, according to analysts at consulting firm McKinsey & Company. In a bullish scenario, this value could even double to $4 trillion.
Slow Adoption but Promising Future
McKinsey’s analysts noted “visible momentum” in tokenization but acknowledged that broad adoption remains distant due to the complexities of modernizing existing financial infrastructure, especially within the regulation-heavy financial services industry.
Early Adopters and Market Potential
The analysts predict that certain asset classes, such as:
- Cash and deposits
- Bonds and exchange-traded notes (ETNs)
- Mutual funds and exchange-traded funds (ETFs)
- Loans and securitization
These are expected to reach a tokenized market capitalization of $100 billion by 2030. Conversely, derivatives and stocks are seen as the least likely to be widely tokenized in the near term. Notably, the analysts’ estimates exclude stablecoins, tokenized deposits, and central bank digital currencies (CBDCs).
Overcoming the “Cold Start” Problem
Tokenization faces a common challenge known as the “cold start problem,” where the technology needs users to gain value but struggles with limited liquidity. This deters tokenized issuance and may lead to parallel issuance on legacy technology.
To overcome this hurdle, McKinsey’s analysts suggest that tokenization must offer clear benefits over traditional finance systems. For example, tokenized bonds, while currently offering marginal benefits over traditional issuance, could gain traction by providing:
- Greater mobility
- Faster settlement
- More liquidity
Indicators of a Tipping Point
The analysts identified several signs that tokenization has reached a tipping point, including:
- Blockchains capable of supporting trillions of dollars in volume and seamless connectivity
- Regulatory advancements that provide clarity on data access and security
Early Movers Stand to Benefit
Institutions that embrace tokenization early could capture significant market share and set standards within the industry, gaining a reputation boost. However, many institutions remain in a “wait and see” mode, observing the evolving landscape before committing fully.
