As Markets Correct, Tokenizers Predict a Tipping Point
The potential in wealth and asset management is huge, but it always seems to be just out of reach.
The dark art of tokenization. It is kind of like securitization, but then it isn’t. The closest definition finews.asia has managed to tie down hovers in the gray area between a piece from late last year and another in 2023.
In the former, the underserved Asia Pacific HNWI segment gets their due in the digitalization and automatization of a so-called tokenized portfolio ecosystem, fractionalized and held by multiple investors, individually, of course, with manual processes duly automated with smart contracts.
Underlying Assets
The latter piece points out that it could be a transformative tool creating a frictionless digital marketplace for asset managers to tokenize the underlying assets held by funds.
Now, a report released on Tuesday by blockchain digital payment company Ripple and Boston Consulting Group goes a step further in providing definitional clarity.
Complete Redesign
«Tokenization isn’t a digital overlay or an addition to the global financial system. It’s a redesign of the infrastructure layer that financial institutions have depended on for years. The promise: a financial system that’s programmable, interoperable, always on, instant, and broadly accessible,» they maintain.
Moreover, nothing about it is new, given that blockchain itself was conceived in 2008, during the heat of the Global Financial Crisis.
Transformative Potential
«What’s novel is the realignment: shifts in maturity of technology, advances in regulation, and a growing recognition of transformative potential that leads to institutional commitment. The infrastructure is finally catching up with the vision,» they state.
As management consultants and interested parties, they also exhort institutions to «act now» to not only save costs but generate new sources of revenue and client segments, «before the pace is set entirely by early movers».
Compound Growth
While legacy institutions face a deep correction in traditional financial markets given the Trump 2.0 mania for tariffs, itself a centuries-old tool, albeit not an entirely proven one, they remain entirely positive, saying the compound annual growth rate has been in the double digits since like 2023.
That was, however, after momentum stalled in 2022 when several high-profile blockchain projects collapsed.
Scenario Midpoint
Despite the blip, they predict the tokenization of real-world assets will grow from $0.6 trillion this year to a gob-smacking $18.9 trillion in 2033.
But this is just the midpoint of their current scenario, which is based on a 53 percent compound annual growth rate.
Along for the Ride
They also predict that all the conventional asset classes, from funds, fixed income, and equities to real estate, loans, deposits, alternative investments, and even stablecoins, will be increasingly tokenized.
Moreover, all major legacy banking sectors will be going along for the ride, including private banking and wealth management.
Scaling Up
«In the early years, financial institutions will lead by tokenizing instruments like bonds and funds. From 2029 onward, tokenization by corporates in consumer goods, industrials, and tech will begin to scale,» the report stated.
Regionally, the main financial hubs of Japan, Singapore, and Hong Kong are already piloting tokenized bonds, funds, and structured products in regulatory sandboxes and through various consortiums in the industry.
Tariffs up Next
This all sounds very positive, particularly given the current confused state of the market and the international trade environment.
Given the way things are going, though, they might want to start tokenizing tariffs as well.
Theoretically Possible
As the AI search engine Perplexity indicates, this appears to be theoretically possible but not «commonly practiced».
It does, however, suggest looking at tokenizing tariff credits, trade incentives, and compliance certificates for a start - enough to make any commercial banker worth their salt sit up and take notice.
