Banking giant expects $4 trillion to $5 trillion of tokenised digital securities and $1 trillion of distributed ledger technology-based trade finance volumes by 2030.
US-based Citigoup Inc. released a report last month that outlines the future for asset tokenisation and the blockchain economy. In the report, Money, Tokens, and Games: Blockchain’s Next Billion Users and Trillions in Value, the bank articulates an inflection point, “where the promised potential of blockchain will be realised and be measured in billions of users and trillions of dollars in value.”
Citi expects tokenisation to be the main driver in the blockchain space, one that will mobilise the entire industry into mass adoption. Its report predicts that “tokenisation of financial and real-world assets could be the killer use case driving blockchain breakthrough with tokenisation expected to grow by a factor of 80x in private markets and reach up to almost USD 4 trillion in value by 2030.”
“We forecast $4 trillion to $5 trillion of tokenised digital securities and $1 trillion of distributed ledger technology-based trade finance volumes by 2030,” the firm’s analysts write. Of the up to $5 trillion tokenised, the bank estimates $1.9 trillion will come in the form of debt, $1.5 trillion from real estate, $0.7 trillion from private equity and venture capital and between $0.5-1 trillion from securities.
The future of money
Much of our focus at Quant is on new digital currencies and payment systems because we believe they hold enormous promise. Citi’s report endorses this, stating that “a key area where blockchain/DLT will make a significant impact is in digital money. The world of money is being turned on its head with central bank digital currencies coming our way towards the second half of this decade, with many CBDC projects being partially DLT-linked.”
“Get ready for CBDC versions of the euro, British pound, and Indian rupee. Together, these four jurisdictions constitute more than 25% of the global population and 22% of global bank deposits,” write the bank’s analysts. “Hence, we think CBDCs could have at least 2 billion users and $5 trillion-plus in circulation, and half could be using partly DLT-linked models.”
Why is the US’s third-largest bank so bullish on CBDCs? It offers four key takeaways:
- “More big countries catching up: Initially, only a few smaller island nations and Nigeria launched CBDCs and China was in advanced stages of researching and piloting a CBDC. Now, major countries in terms of economy, currency, and population size are warming up to the idea of CBDCs. For example, the central banks of India, the UK, and Europe have been making plans to launch CBDCs before the end of the decade.
- Billions of users: Taking into account only Europe, India, and the UK, there are about 2 billion individuals and businesses that could be using some form of CBDC. Businesses in countries with multi-CBDC bridge arrangements would also use DLT-linked CBDCs, although their domestic CBDCs would be non- DLT-linked.
- Technology: Until now, only the smaller CBDC projects have been based on DLT. However, we can envision some major banks issuing DLT-based CBDCs and India’s retail CBDC could have some sort of DLT. China’s participation in the mCBDC Bridge is based on a DLT.
- Money mobilised: Central banks estimate up to 20% of deposits could transition to newer digital money formats. We could have $5 trillion of CBDCs circulating in major economies in the world in this decade, half of which could potentially be DLT-linked.”
The world’s assets will be tokenised
Currencies are not the only type of asset to benefit from tokenisation. Citi’s report makes it clear that Quant’s conviction about tokenisation is well-founded too.
“Almost anything of value can be tokenised — from wine to financial assets to everything in between,” write the bank’s analysts. “The significant benefits of tokenisation, especially for private funds and securities, will likely drive demand-side uptake, leaving behind expensive reconciliations and settlement failures while embracing operational efficiencies, fractionalisation, and accessibility to a wider range of market participants. Beyond private market tokenisation, we expect $1 trillion of the repo, securities financing and collateral market could be tokenised by 2030.”
Path to the future
How can the industry achieve the benefits of blockchain? To Citi’s analysts, mainstream adoption requires enablers including, decentralised digital identities, zero-knowledge proofs, Oracles, and secure bridges. Legal plumbing is also essential, as are regulatory considerations to allow adoption and scalability without “hindering innovation.”
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