The benefits of tokenization are simple, the process brings operational efficiencies and improved liquidity and accessibility, Bernstein said in a research report on Tuesday.
Tokenization is the process by which real-world assets are converted into blockchain-based tokens.
Currency tokenization, via stablecoins and central bank digital currencies, will see application in on-chain deposits and payments, the report said, with about 2% of global money supply to be tokenized over the next five years, which is about $3 trillion, the report added.
“Over the next five years, we expect a swell in the stablecoins and CBDC tokens in circulation, led by China’s CBDC program,” analysts led by Gautam Chhugani wrote. “Stablecoins and CBDC tokens, coupled with yield farming in decentralized markets, will compete with bank deposits as an investment or saving instrument,” the analysts wrote.
Still, the broker notes current regulatory uncertainty, and says 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.”
“How policy-makers regulate blockchain-based businesses will determine how they view tokenization of real-world assets,” the note said, adding that “regulations may blunt the advantages of tokenization."
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.