The Weekend #186—McKindsey: The $2 trillion tokenization market
And that’s not including stablecoins
For McKinsey, the tokenization market is reaching a tipping point, fueled by rapidly growing availability of tokenized money such as stablecoins.
In their latest report—From ripples to waves: The transformational power of tokenizing assets (via Margaret Slemmer)—the consulting firm predicts that the total market size could reach $1.9 trillion excluding crypto and stablecoins by 2030 as their base scenario. Included, the total market could reach $3 trillion. More optimistic projections point at twice the figure.
Their reasoning is intuitive:
If we were to design the future of financial services, we would arguably include many of the features of tokenized digital assets: 24/7 availability; instant global collateral mobility; equitable access; composability, thanks to a common technology stack; and managed transparency. Highlighting the strategic future of this technology, Larry Fink, chairman and CEO of BlackRock, said in January 2024, “We believe the next step going forward will be the tokenization of financial assets, and that means every stock, every bond […] will be on one general ledger.”1 More and more institutions are rolling out and scaling tokenized products, from tokenized bonds and funds to private equity and cash.
Finance and banking is a historically conservative industry and while many global institutions are experimenting with proof of concepts, bringing tokenized products to market at scale is still a ways away. For institutions on the sidelines, McKinsey highlights these signposts to look out for:
infrastructure: blockchain technology able to support trillions of dollars of transaction volume
integration: blockchains for different applications demonstrating seamless interconnectivity
enablers: widespread availability of tokenized cash (for example, CBDCs, stablecoins, tokenized deposits) for instant settlement of transactions
demand: appetite from buy-side participants to invest at scale in on-chain capital products
regulation: actions that provide certainty and support a fairer, more transparent, and more efficient financial system across jurisdictions, with clarity on data access and security
Meanwhile, while risks are a plenty for first movers, the rewards are increasingly compelling:
The history of blockchain applications is littered with casualties of such challenges. That history may deter incumbents who may feel more secure following business as usual on legacy platforms. But such a strategy creates risk, including material loss of market share. As today’s high-interest environment has produced clear use cases for some tokenized products such as repos, market conditions have the potential to quickly sway demand. As signposts for the adoption of tokenization emerge, such as regulatory clarity or maturing infrastructure, trillions of dollars of value can move on-chain, creating a sizeable value pool for first movers and disruptors (Exhibit 4).