Tokenization, the process of transforming real-world assets into blockchain-based tokens, has the potential to unlock a market worth approximately $5 trillion within the next five years, according to a new report by Bernstein.
The report, released on Tuesday, highlights that this significant growth could be led by stablecoins, central bank digital currencies (CBDCs), securities, private market funds, and real estate. Bernstein’s research suggests that stablecoins and CBDCs could be instrumental for on-chain deposits and payments.
“Over the next five years, we expect a swell in the stablecoins and CBDC tokens in circulation, led by China’s CBDC program,” wrote analysts led by Gautam Chhugani.
Bernstein projects that around 2% of the global money supply might be tokenized in the coming five years, translating to roughly $3 trillion. The report also suggests that stablecoins and CBDCs, combined with yield farming in decentralized markets, will compete with traditional bank deposits as an investment or saving instrument.
However, Bernstein acknowledges the significant challenge posed by regulatory uncertainty. The report stresses that tokenization using blockchain can only thrive if policymakers understand the benefits of blockchains and recognize crypto tokens as essential to blockchain operations.
The analysts caution that how policymakers regulate blockchain-based businesses will influence the success of tokenization. They note that stringent regulations could diminish the advantages of tokenization, impacting its potential market growth.