Tokenrize: Institutional digital asset trends and opportunities for 2023

A recent survey from BNY Mellon reveals that 97% of institutional investors agree that tokenization will revolutionize asset management. Furthermore, BlackRock is amongst a growing number of firms backing the tokenization of securities. Larry Fink said that "the next generation for markets, the next generation for securities, will be tokenization of securities."

The total market size of tokenization could reach 10% of global GDP or $16 trillion by 2030 according to a BCG and ADDX report. Those trends and surveys further confirm our views that tokenization will accelerate in 2023 with the help of several drivers.

Faster Distributed Ledger Technology (DLT) Adoption

Banks and institutions will be looking to build more digital custody solutions and improve their structural and transactional costs using DLT. CBDC pilots and post-trade payment and settlement pilots have been going well with many big institutions looking to go to the next level. The improvement is the most impactful for private assets in terms of operational efficiency, speed of transactions and increased liquidity. All those DLT solutions will benefit from being interoperable allowing different blockchain systems permissioned or public to work together seamlessly.

Cross-Industry Collaboration is Key

The financial industry is in transition and the challenge for traditional players is how they will upgrade their traditional ecosystems. Cross-industry collaboration is key and should encompass issuers, investors, banks, regulators, technology and service providers and other market participants. In the absence of the resources and expertise to build their own digital infrastructure, collaboration is an opportunity to accelerate their digital asset journey by leveraging new tokenization solutions built around extending and improving the legacy system on an optional basis and not trying to replace it.

Increased Standardization of Tokenization

Real estate, securities, bonds and funds tokenization are the early pioneering projects. Significant fund managers like KKR, Apollo, and Hamilton Lane are stepping up and testing tokenization and are helping build the rails and standards. The establishment of an appropriate regulatory framework regarding security tokens will further drive institutional adoption.?

With faster DLT adoption, increased collaboration and standardization, tokenization will pave the way for the digitization of all investable assets making raising capital easier, faster and more efficient.