Toward a Tokenized Future

Digitization will improve efficiency and open new markets — but the revolution won't happen overnight.

## Highlights

• The creation of a digital representation of a broadening array of rights and assets will enable a new scale of market efficiencies and democratize access to previously unavailable investment asset classes.

• The crypto downturn and failure of FTX may impact general perceptions and policy formation, but they should not undermine the longer-term potential of tokenization; cryptocurrencies are a minor, though much-publicized, part of the potential tokenized universe.

• The pace of transformation will be affected by the need for material investments and an evolution in laws and regulations.

• The business models of numerous intermediaries will evolve or even disappear, but new types of service providers will emerge.

## Introduction

Tokenization — the conversion of assets and rights into a digital token on a blockchain — will likely upend by 2030 the transaction methods of many well-established asset classes, tangible or intangible. It will also enhance the accessibility of established asset classes, and allow the creation of new ones, for a broader range of investors in underserved frontier markets.

## The Main Attraction of Tokenization

Tokenization is the process of issuing a digital token that represents a tradable asset. The digital token can then be owned, used and transferred through a blockchain, reducing the need for third-party intermediaries. In principle, anything featuring property rights and economic value can be tokenized.

### Key Expected Benefits

1. Accessibility/liquidity: Tokenization allows fractionalization, democratizing direct investment in more costly assets.

2. Efficiency: Technology and smart contracts can allow faster and lower-cost asset transfers by automating certain parts of the process.

3. Transparency: The immutable nature of the underlying technology prevents tampering.

4. Privacy: Personal data is fully owned and controlled via decentralized identity by each individual or entity.

## Why It Won't Be an Overnight Revolution

Cryptocurrencies are a fraction of the potential tokenized ecosystem. The crypto winter and default of several protocols and players do not impact the prospects of tokenization by 2030, but they have affected perceptions and short-term activity levels.

### Challenges

• Progress in policies and technology is needed to avoid long-term bottlenecks.

• Regulators will focus on maintaining financial stability, protecting consumers, and ensuring responsible market conduct.

• New technology will require large capex investments.

• A tokenized central bank currency or stablecoin will be needed for payments.

## Likely Impacts

• Some intermediaries will disappear, some will evolve, and new ones will materialize.

• Agents will address novel risks in the connection between off- and on-chain worlds.

• New investment opportunities and technologies will require new advisory services.

## Conclusion

A tokenized future does not mean the emergence of a separate, virtual and totally decentralized ecosystem. For tokenization and its attendant benefits to scale up while containing risks, compromises and hybrid solutions are necessary. Intermediaries will still exist, even if they take new forms, and stakeholders must remain mindful of the emergence of new forms of concentration in some of these agents.