Crypto’s ‘killer use case’? That’s asset tokenization in the real world, Citi and other analysts say

Bitcoin maximization considerations aside, the broader crypto world has long speculated as to what will be the true catalyst for mainstream cryptocurrency adoption. The concept of real-world asset tokenization seems to have entered the conversation with a bit more force lately.

Gaming, DeFi and, yes, Bitcoin’s strong narrative as a Gold 2.0 store of value (and even a future world reserve currency) have all been touted as gateways for floods of fresh capital to enter the space.

But what are real-world assets in the crypto sense? As the popular Twitter account @thedefiedge explains it, “RWA” are physical assets that can be symbolized and represented digitally, and immutably, on blockchains.

“An example is fiat-backed stablecoins: $1 is held in a bank and then tokenized on a blockchain. It has DeFi superpowers once it’s on the chain,” he further explains.

DeFi Edge pointed to recent research from the Boston Consulting Group (BCG), which suggests that the tokenization of global illiquid assets could become a $16 trillion industry by 2030.

And to put that into some sort of context, that’s about 15% of global GDP (gross domestic product) that 2023 is projected to reach.

According to the research’s classifications, real assets include stocks, bonds, mutual funds and other financial instruments and can also include commodities such as gold, silver and real estate.

Crypto Reaches an ‘Inflection Point’: Citi

Last month, US multinational investment bank Citi Group released its “Money, Tokens and Games” report, in which it identified RWA tokenization as a potential “killer use case”.

In fact, for this adoption narrative, Citi estimates that the crypto market itself could reach between USD 4 trillion to USD 5 trillion by 2030.

Yes, that’s quite a bit less than the Boston Consulting Group estimate, but it’s still a bullish thesis given the crypto market’s total capitalization is roughly $1.2 trillion at the time of writing.

Still, drilling into the subsector specifically, Citi says it would mark an 80-fold increase from the current value of real assets locked on blockchains.

Citi also noted that the crypto industry is “approaching an inflection point” and that blockchain technology will soon see “billions of users and trillions of dollars in value”.

“We estimate $4 trillion to $5 trillion of tokenized digital securities and $1 trillion of distributed ledger technology (DLT)-based trade finance volumes by 2030,” the firm’s analysts said.

The firm added that it will circulate up to US$5 trillion of central bank digital currencies (CBDCs) around the world.

Managing editor of the Citi Global Perspectives and Solutions report, Kathleen Boyle, noted in her introduction to the report that blockchain and crypto adoption will also be driven by CBDCs, tokenized assets in games and blockchain-based social media payments, adding:

“Successful adoption will be when blockchain has several billion users who don’t even realize they’re using the technology.

“While we believe mass adoption may still be six to eight years away, momentum on adoption has shifted positively as governments, large institutions and companies have moved from investigating the benefits of tokenization to trials and proofs of concept.”

One last thing to note here, as DeFi Edge points out (see below), there are already some pretty prominent crypto protocols that focus on real-world asset tokenization. Some of these include: GoldFinch, Centrifuge, TrueFi, Maple Finance and MakerDAO.