McKinsey Projects $2 Trillion Market for Tokenized Financial Assets by 2030

In a recent report, McKinsey & Company forecasts the tokenized financial assets market could reach $2 trillion by 2030.

This projection shows the transformative potential of the real-world assets (RWA) tokenization sector. It also highlights the strategic importance of financial institutions equipped with blockchain capabilities.

Democratizing Investments: How Tokenization Opens Doors for Small Investors 

McKinsey’s analysis suggests asset tokenization will occur in waves. The initial wave will focus on asset classes with proven returns on investment and scalability.

These include cash and deposits, bonds and exchange-traded notes (ETNs), mutual funds, and securitizations. By 2030, the total tokenized market capitalization could reach approximately $2 trillion, driven primarily by these asset classes.

“The pessimistic and optimistic scenarios range from about $1 trillion to about $4 trillion, respectively,” McKinsey analysts added.

Read more: How To Invest in Real-World Crypto Assets (RWA)?

Potential Scale of Tokenization Adoption. Source: McKinsey

This figure contrasts with the September 2022 projection by ADDX and BCG, which estimated the global market for illiquid asset tokenization could reach $16 trillion by 2030. These differing projections highlight varying perspectives on the speed and scale of tokenization adoption.

Furthermore, the report pointed out that one of the most compelling aspects of tokenization is its potential to democratize access to traditionally exclusive investments. By lowering the minimum investment sizes, tokenization enables a broader range of investors to participate in high-value assets.

This democratization is evident in regions like Thailand and the Philippines. The issuance of tokenized bonds in those areas has enabled small-ticket investors to engage through fractional ownership.

Repurchase agreements, or “repos,” are also a successful use case for tokenization. Financial institutions like Goldman Sachs currently transact trillions of dollars of monthly repo volume using tokenized platforms.

“On the operational side, smart-contract-enabled execution automates daily life cycle management (for example, collateral valuation and margin top-ups). It reduces errors and settlement failures and simplifies reporting; 24/7 instant settlement and on-chain data also improve capital efficiency through intraday liquidity for short-term borrowing and enhanced collateral usage,” McKinsey analysts elaborated.

Overcoming Regulatory and “Cold Start” Challenges

Despite the clear benefits and growing momentum, the report acknowledges that widespread adoption of tokenization faces several challenges, including regulatory hurdles. One major challenge is the complexity of modernizing existing infrastructure in a regulation-heavy industry.

“In many jurisdictions, the regulatory and legal certainty to engage with any form of digital assets is lacking, and critical enablers, such as widespread availability of wholesale tokenized cash and deposits for settlement, have yet to be supplied,” the report outlined.

In addition to regulatory challenges, McKinsey’s report emphasizes the importance of overcoming the “cold start” problem to achieve true scale in tokenization. This challenge arises from the need for network effects, where investors capture real value from cost savings, higher liquidity, or enhanced compliance.

Read more: What is The Impact of Real-World Asset (RWA) Tokenization?

However, the report introduces the concept of minimum viable value chains (MVVCs) to solve the cold start problem. MVVCs collaborate with financial institutions and other stakeholders to create interconnected infrastructures supporting tokenized assets. Examples include the blockchain-based repo ecosystems operated by Broadridge and JPMorgan’s Onyx platform in collaboration with Goldman Sachs and BNY Mellon.