Citi says trillions in assets could be tokenized by 2030

Investment bank Citi is betting on the blockchain-based tokenization of real-world assets to become the next “killer use case” in crypto, with the firm forecasting the market to reach between $4 trillion to $5 trillion by 2030.

That would mark an 80-fold increase from the current value of real-world assets locked on blockchains, Citi explained in its “Money, Tokens and Games” March report.

“We forecast $4 trillion to $5 trillion of tokenized digital securities and $1 trillion of distributed ledger technology (DLT)-based trade finance volumes by 2030,” the firm’s analysts said.

Of the up to $5 trillion tokenized, 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 research suggests that private equity and venture capital funds will become the most tokenized asset class, capturing 10% of its total addressable market, with real estate coming in next at 7.5%.

Private equity markets will likely see faster adoption rates because of their favorable liquidity, transparency and fractionalization properties, the bank explained.

KKR, Apollo and Hamilton Lane are three private equity firms that have already set up tokenized versions of their funds on platforms like Securitize, Provenance Blockchain and ADDX.

Citi said that blockchain tokenization will supersede legacy financial infrastructure because it is technologically superior and it provides more investment opportunities in private markets.

“Traditional financial assets are not broken, but sub-optimal as they are limited by traditional systems and processes,” it said. “Certain financial assets — such as fixed income, private equity, and other alternatives — have been relatively constrained while other markets — such as public equities — are more efficient.”

Citi argues that blockchain tokenization negates the need for expensive reconciliation, prevents settlement failures and makes tedious operations ever more efficient:

“What DLT and tokenization offer is an entirely new tech stack that lets all stakeholders do all activities on the same shared infrastructure as one golden source of data — no more…