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Tokenized financial assets have had a “cold start” but they are tracking to reach a market size of about $2 trillion by 2030, say analysts at consulting firm McKinsey &amp; Company.
“In a bullish scenario, this value could double to around $4 trillion,” the analysts <a href="https://www.mckinsey.com/industries/financial-services/our-insights/from-ripples-to-waves-the-transformational-power-of-tokenizing-assets" target="_blank" rel="noopener nofollow">wrote</a> on June 20, despite being “less optimistic than previously.”
McKinsey’s analysts said there’s been “visible momentum” on <a href="https://cointelegraph.com/learn/asset-tokenization">tokenization</a>, but broad adoption is still far away as modernizing existing financial infrastructure is “challenging, especially in a regulation-heavy industry such as financial services.”
The analysts expected cash and deposits, bonds and exchange-traded notes (ETNs), <a href="https://cointelegraph.com/learn/different-types-of-etfs">mutual funds</a> and exchange-traded funds (ETFs), loans and securitization to reach “meaningful adoption” first — meaning a $100 billion of tokenized market capitalization by 2030.
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 <img src="https://s3.cointelegraph.com/uploads/2024-06/e46c845a-489d-4616-a926-0901c4b12dbc.png" alt="" title="">
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 Derivatives and stocks were predicted to be the least likely to be widely tokenized. Source: McKinsey &amp; Company
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The analysts estimate excluded stablecoins, tokenized deposits and central bank digital currencies (CBDCs).
<h2 id="better-use-cases-would-thaw-cold-start">Better use cases would thaw cold start</h2>
McKinsey’s analysts pointed out that tokenization faces the typical "cold start problem," where tokenized assets<a href="https://cointelegraph.com/news/what-is-the-network-effect"> require users to have value</a>.
The technology has issues with limited liquidity, which deters a tokenized issuance. Fear of losing market share can also lead to tokenized assets with a “parallel issuance on legacy technology.”
The analysts added tokenization needs a use case where it <a href="https://cointelegraph.com/news/ethereum-etfs-3-pitches-that-could-convince-wall-street-investors">offers a benefit</a> over traditional finance systems.
“One such example is the tokenization of bonds. Barely a week goes by without the announcement of a new tokenized bond issuance,” McKinsey’s analysts wrote. 
<blockquote data-ct-non-breakable="true">
 “While there are billions of dollars of tokenized bonds outstanding today, benefits over traditional issuance are marginal, and secondary trading remains scarce.”
</blockquote>
In their example, the analysts said the slow start <a href="https://cointelegraph.com/news/real-word-asset-tokens-defi-market">could be fixed</a> by providing “greater mobility, faster settlement, and more liquidity.”
Related: <a href="https://cointelegraph.com/news/institutional-defi-players-will-buy-tokenized-real-estate-kpmg">Institutional DeFi players will bring commercial real estate onchain: KPMG exec</a>
McKinsey’s analysts added early movers who “catch the wave” of tokenization could see an outsized market share and could set the agenda on standards, along with getting a reputation bump.
“But many more institutions are in ‘wait and see’ mode,” they said. 
The analysts noted that there are indicators suggesting when tokenization has reached a tipping point. These include blockchains capable of handling trillions of dollars in volume, seamless connectivity among blockchains, and regulatory advancements providing clear guidelines on data access and security.
Magazine: <a href="https://cointelegraph.com/magazine/tokenizing-music-royalties-nfts-taylor-swift-3lau-nas-the-weeknd/">Tokenizing music royalties as NFTs could help the next Taylor Swift</a>

Asset tokenization to reach $2T by 2030 despite ‘cold start’ — McKinsey

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