According to a research report from Bernstein on Tuesday, the advantages of tokenization are clear: it brings operational efficiencies, improved liquidity, and increased accessibility. Tokenization is the process of converting real-world assets into blockchain-based tokens. Bernstein estimates that the potential value of tokenization over the next five years could be as high as $5 trillion, driven by stablecoins, central bank digital currencies (CBDCs), private market funds, securities, and real estate.
The report states that currency tokenization, through stablecoins and CBDCs, will be used for on-chain deposits and payments. It is estimated that 2% of the global money supply, or around $3 trillion, will be tokenized in the next five years. “We expect a swell in the stablecoins and CBDC tokens in circulation, led by China’s CBDC program,” the analysts wrote. “Stablecoins and CBDC tokens, coupled with yield farming in decentralized markets, will compete with bank deposits as an investment or saving instrument.”
However, the report also acknowledges the current regulatory uncertainty surrounding tokenization. “Tokenization using blockchain can only succeed when policy-makers appreciate the benefits of blockchains and how crypto tokens are an indispensable part of blockchain operations,” the note said. “How policy-makers regulate blockchain-based businesses will determine how they view tokenization of real-world assets. Regulations may blunt the advantages of tokenization.”