The landscape of tokenized real-world assets (RWAs) is projected to reach merely $2 trillion by 2030, according to McKinsey & Company’s latest report. Even under the most optimistic scenarios, the market might only expand to $4 trillion, reflecting a cautious adoption rate of blockchain technology by financial institutions.

“Comprehensive adoption of tokenization remains distant,” the report states, suggesting the market could shrink to as little as $1 trillion. As the focus shifts from pilot projects to fully scaled solutions, numerous opportunities and challenges lie in reimagining the future framework of financial services.

Tokenization has emerged as a compelling application of blockchain technology, gaining traction among global asset managers and banking giants such as BlackRock, Citigroup, and HSBC. These entities, alongside digital asset firms, are increasingly leveraging blockchain for traditional assets like U.S. Treasuries and commodities—collectively referred to as RWAs—seeking enhanced operational efficiencies and broader market access.

Read more:The Future of Real World Assets With Blockchain, NFTs and Metaverse

The phenomenon garnered substantial attention over the past year, with optimistic forecasts from Boston Consulting Group and digital asset manager 21Shares predicting a much larger market by the decade’s end. However, McKinsey’s report underscores a more conservative outlook, placing tokenization at a “tipping point” as various projects transition from pilot phases to large-scale deployment.

In McKinsey’s baseline scenario, the tokenized asset market is anticipated to approach a $2 trillion valuation by 2030, excluding tokenized deposits, stablecoins, and central bank digital currencies. The bullish projection of $4 trillion hinges on favorable regulatory environments, industry collaboration, and the absence of systemic disruptions impeding adoption.

According to the report, mutual funds, bonds, exchange-traded notes, repurchase agreements (repos), alternative funds, loans, and securitizations will spearhead tokenization initiatives. Conversely, assets like real estate, commodities, and equities may witness slower adoption due to marginal benefits, feasibility concerns, complex compliance requirements, or insufficient incentives for key industry players.

Many institutions remain in a “wait and see” mode, awaiting clearer signals to embrace tokenization. This hesitancy positions early adopters to potentially secure substantial market share, the report notes.

“Blockchain technology is still in its infancy and necessitates significant integration with existing processes and standards,” remarked Anthony Moro, CEO of Provenance Blockchain Labs, in a note to CoinDesk. “Most institutions acknowledge the need for tokenization to become a substantial component of their operations moving forward, yet technical integration presents a critical challenge.”