RWA Tokenization: The Next Big Thing in Asset Management, According to Boston Consulting Group
Boston Consulting Group (BCG), a leading global consulting firm, has labeled the tokenization of real-world assets (RWA) as “the third revolution in asset management.” In a report released on October 29, BCG, in collaboration with Aptos Labs and Invesco, predicts that tokenized assets could make up 1% of all global mutual funds and exchange-traded funds (ETFs) within seven years, potentially reaching $600 billion in assets under management by 2030.
Investor demand in tokenized funds is on the rise, according to David Chan, Managing Director and Partner at BCG. Based on their findings, the RWA tokenization market could expand up to 50 times by the end of the decade. BCG attributes this growth to the increasing presence of regulated on-chain currencies, such as stablecoins, tokenized deposits, and central bank digital currencies (CBDCs), which are expected to encourage investors to explore tokenized investment options. These currencies provide a regulated, blockchain-based approach to traditional financial products.
State Street Global Advisors, a major player in asset management, also released a report in October, highlighting the bond market as particularly suitable for blockchain adoption. The report explains that bonds possess characteristics that make them ideal for tokenization, such as recurring issuance costs, intricate structures that can benefit from automation through smart contracts, and a strong need for efficient collateral transfers. By utilizing blockchain technology, the costs associated with issuing and managing bonds could be significantly reduced. High-velocity markets like repos and swaps could also greatly benefit from blockchain’s ability to streamline transactions.
While bonds are seen as a promising asset type for tokenization, other assets like private equity also show high potential. However, the tokenization of real estate and private equity faces additional challenges due to complex regulations and the need for technological infrastructure. Despite these obstacles, the RWA tokenization sector is growing, as reported by the Financial Stability Board. Adoption rates may currently be low, but initiatives in tokenizing government debt, equity stakes, and commodities are on the rise. As of October, the value of tokenized RWAs stands at $13.25 billion, a 60% increase from this year, according to data analytics platform rwa.xyz.
Industry experts have high expectations for the RWA tokenization market. Tren Finance predicts a 50-fold expansion by 2030, while even more conservative estimates from Citigroup suggest that $4 trillion to $5 trillion worth of tokenized digital securities could be minted by the same year. Recognizing this potential, major companies like Goldman Sachs are making significant moves in the tokenization space. Goldman Sachs plans to launch three new tokenization products later this year in response to growing client interest.