Tokenization Adoption To Be Led By Mutual Funds, Bonds, Loans: McKinsey Report

According to CoinDesk, the adoption of tokenization will occur in waves, with assets such as mutual funds, bonds, and loans leading the way, according to a report by McKinsey. The report suggests that many institutions are still adopting a 'wait and see' approach, while early adopters could seize a larger market share. The market for tokenized assets could reach $4 trillion by 2030 in an optimistic scenario, as financial institutions gradually adopt blockchain technology for traditional financial instruments. This is a slower and more limited adoption than some reports have predicted. McKinsey's report, released on Thursday, suggests that the figure could be as low as $1 trillion. The report states, 'Broad adoption of tokenization is still far away. As infrastructure players pivot away from proofs of concept to robust scaled solutions, many opportunities and challenges remain to reimagine how the future of financial services will work.' Tokenization has become a popular use case for blockchains during this bull market. Global asset managers and banks such as BlackRock, Citigroup, and HSBC, along with native digital asset firms, are applying blockchain technology to traditional assets such as U.S. Treasuries and commodities. This trend has gained significant attention over the past year, with reports by Boston Consulting Group and digital asset manager 21Shares predicting that the tokenized asset market could reach several multiples of the McKinsey estimate by the end of the decade. The McKinsey report suggests that tokenization is at a 'tipping point,' with many projects transitioning from pilot to large-scale deployment. The company estimates that the tokenized asset market could reach nearly $2 trillion by 2030, excluding tokenized deposits, stablecoins, and central bank digital currencies. McKinsey's optimistic $4 trillion scenario would be supported by more accommodating regulations, industry-wide collaboration, and the absence of any systemic events that could impede adoption. The report identifies mutual funds, bonds, exchange-traded notes, repurchase agreements (repos), alternative funds, loans, and securitization as the likely leaders in tokenization efforts. However, it predicts slower adoption for assets such as real estate, commodities, and equities, citing marginal benefits, feasibility concerns, complex compliance requirements, and a lack of incentive for key industry players to pursue tokenization. Many institutions are still waiting for a clearer signal to implement tokenization, which could give early adopters an 'oversized' market share.