Tokenization Could Unlock $5 Trillion Market, Driven By Stablecoins And CBDCs: Bernstein Report

Tokenization, a technique through which real-world assets are transformed into blockchain-based tokens, could unlock a mammoth market potential of around $5 trillion within the next half-decade, according to a new report by Bernstein.

The report, released on Tuesday, emphasized that this explosive growth could be spearheaded by stablecoins, central bank digital currencies (CBDCs), securities, private market funds, and real estate.

Delving into the specifics of currency tokenization, Bernstein’s research indicates that stablecoins and central bank digital currencies could be leveraged for on-chain deposits and payments.

“Over the next five years, we expect a swell in the stablecoins and CBDC tokens in circulation, led by China’s CBDC program,” wrote analysts led by Gautam Chhugani.

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The report extrapolated that about 2% of the global money supply might be tokenized in the upcoming five years, roughly translating to $3 trillion.

Furthermore, the analysts asserted, “Stablecoins and CBDC tokens, coupled with yield farming in decentralized markets, will compete with bank deposits as an investment or saving instrument.”

Despite these prospects, Bernstein acknowledged the prevailing regulatory ambiguity, which poses a considerable challenge. The report conveyed that “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 analysts also cautioned, “How policy-makers regulate blockchain-based businesses will determine how they view tokenization of real-world assets,” and also noted that "regulations may blunt the advantages of tokenization."

This highlights the crucial role policy-makers will play in the growth of tokenization, with regulations having the capacity to either foster or hinder this emerging sector.

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