Tokenization, the digital representation of assets like real estate or art on a blockchain, is being widely adopted with only 0.003% of the world’s assets tokenized thus far. Unfettered access, reduced transaction costs, and faster transaction times are key advantages of this approach. While regulatory and security risks sit on the other end of the spectrum, major financial players including BlackRock, Visa, and Mastercard are exploring the potential of asset tokenization. Boston Consulting Group predicts tokenized assets could surpass $600 billion by 2030 from the current $2 billion.
The Defi Comment:
- Asset tokenization is the process of turning physical assets, like property or art, into digital tokens stored on a blockchain. These tokens represent ownership and simplify transactions.
- Only 0.003% of the world’s assets have been tokenized, but momentum is growing with regulatory improvements and adoption by major companies like BlackRock, Visa, and Mastercard.
- BlackRock launched a tokenized money-market fund in 2024, demonstrating institutional confidence in the technology.
- Tokenization could increase the value of assets under management to over $600 billion by 2030.
- Tokenization offers many benefits such as enhanced liquidity, reduced costs, faster transactions, and programmability of smart contracts.
- However, poorly structured tokenization projects pose risks like overpricing, investor exploitation, and potential security breaches.
- Regulatory clarity and supportive environments, like that expected under the U.S. President-elect Donald Trump, are crucial for the growth of tokenization.
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