Asset Tokenization

Asset tokenization refers to a process in which tangible assets such as property, equity, or goods are converted into digital tokens on a blockchain and can be further traded and managed in digital form. This approach provides more liquidity, transparency, and efficiency due to the ability to buy fractions of any cryptocurrency and no requirement for intermediaries.

The Asset Tokenization Market is expected to grow with a significant CAGR of 40.5% during the forecast period (2024-2032). This is due to the asset tokenization growth being highly stable due to the developing worlds of blockchain and smart contracts, the need for liquidity in various industries, as well as the changing legislation that has adopted digital asset exchanges. For instance, in July 2024, RACE, a pioneering full-stack modular blockchain infrastructure platform, announced the mainnet launch of its Ethereum Layer 2 (L2) blockchain, specifically designed for tokenizing and distributing real-world assets (RWAs). Built on Optimism’s OP Stack, a leading Ethereum scaling solution, RACE’s new blockchain has joined Optimism’s Superchain, alongside OP Mainnet and Base. This integration promises enhanced asset interoperability, speed, and safety for its users. These factors combined lead to market growth and mean that asset tokenization is becoming the driving force in the financial and investment industries.

• Based on the asset type, the market is segmented into real estate, debt (digital bonds), investment funds, private equity, public equity, commodities, and others. The real estate segment dominated the global market in 2023. This is mainly because it has offered considerable opportunities for fractional ownership and improved market liquidity. The use of tokens in real estate assets means that investors can purchase securities that represent a portion of the property, thus enabling more people to be able to buy these expensive properties. It expands the availability of investment and invites a wide range of investors including the retail and large institutional ones.
• Based on the technology, the market is segmented into blockchain platforms and smart contracts. The blockchain platforms held a significant market share in 2023. This offers the technological base that is required for the secure and efficient management of digital assets. They also provide transparency, security, and immutability that increase market trust and optimize operations. With the advancements in blockchain, scalability, and interoperation with the existing financial architecture are promoted to advance the use of asset management through tokenization. In addition, the advances made in blockchain platforms including interoperability and new consensus mechanisms enhance cross-chain value exchange and other commodities. For instance, on June 7, 2024, Deutsche Bank collaborated with industry partners to launch a paper on blockchain interoperability. Deutsche Bank joined a group of major financial institutions and Web3 innovators to produce an in-depth paper on how to achieve interoperability for tokenized assets across public and private blockchains and legacy systems.
• Based on the end-user, the market has been divided into institutional investors and retail investors. Retail investors are expected to grow with a significant CAGR in the forecast period (2024-2032). This invests to be easily accessible, and several people would be able to invest, hence the considerable number of investors. Also, the ability to trade in tokenized assets on digital platforms matches the desire of retail investors especially those who are technologically inclined thus boosting market engagement. The involvement of the growing number of retail investors also encourages market development in the field of digital assets and promotes the expansion of the asset tokenization market.
• For a better understanding of the market adoption of Asset Tokenization, the market is analyzed based on its worldwide presence in countries such as North America (U.S., Canada, and the Rest of North America), Europe (Germany, France, U.K., Spain, Italy, Rest of Europe), Asia-Pacific (China, Japan, India, Rest of Asia-Pacific), Rest of World. Asia-Pacific is expected to grow with a significant CAGR in the forecast period (2024-2032). Asset tokenization is steadily rising in the Asia-Pacific area, primarily because the governments of Singapore, Hong Kong, and Japan are introducing blockchain into their economies. For instance, on 27 June 2024, The Monetary Authority of Singapore (MAS) announced the expansion of initiatives to scale asset tokenization for financial services. This includes partnering with global industry associations and financial institutions to drive common asset tokenization standards in fixed income, foreign exchange (FX), and asset & wealth management. The region has also embraced the use of digitalization and has friendly laws that support the use of digital assets, hence promoting the market. Thus, using asset tokenization, companies are applying new sources of financing and increasing the demand for assets in non-standardized and illiquid market segments. They are also using technological applications to tackle local regulations to enhance transactional efficiency. Frequent partnerships with local banks and technological companies are encountered, as they work on creating proper solutions for different classes of assets. The increasing focus on fintech improvement and government encouragement of digitalization also help to propel the asset tokenization market in this area.
• Some of the major players operating in the market include Polymath Research Inc., Block Gemini, ADDX, tZERO Technologies, Chainlink, Blocktunix, SoluLab, Blockchain App Factory, Securitize LLC, Tokensoft Inc.