BCG and ADDX forecast a 50-fold increase in asset tokenisation from the end of 2022 to 2030, so it’s no exaggeration that this will turn the global fund industry on its head in the coming years. While we are already seeing the impact on real assets like private equity, this is just the beginning of a transformative journey for our industry.
The reality is that we are still far from seeing the full potential impact of tokenisation on the global funds space, and the industry needs to do more work to understand the full picture. According to the findings of the white paper “The Tokenisation of Real Assets” published by IFI Global with support from Jersey Finance, the growth of tokenisation of assets is generally optimistic to become a $16.1 trillion business by 2030. In a best-case scenario, this estimate rises to $68 trillion.
Based on my experience in the financial services industry, I believe that tokenisation of assets, including private equity and real estate, is on the cusp of global adoption, followed by asset classes such as bonds and equities, which are likely to be significantly impacted by tokenisation in the coming years. Tokenisation brings three major benefits. First, it reduces the human errors that creep into the settlement process. Second, it circumvents the liquidity problem associated with investing in real assets, and third, distributed ledgers are often publicly accessible. Every transaction is stored on it and can be retrieved. And the immutability of the underlying technology means that the transaction history is virtually tamper-proof.
Benefits aside, the challenge is that the Internet has not really changed the structure of the fund industry. This puts pressure on real asset fund managers to keep up with distributed ledger technology. Add to that the regulations and litigation that can arise, including fraud related to smart contracts, which are vulnerable to security breaches and can be manipulated.
From an investor’s perspective, it is also important to understand whether an investment in a tokenised fund means they get to exercise the same rights as when investing in a traditional fund.
From Jersey Finance’s perspective, our world-class digital infrastructure and proportionate approach to regulation means that we have naturally developed a pool of expertise in digital asset innovation. As such, we support research in this area and are committed to helping the industry and broader ecosystem make significant progress in an area that will undoubtedly be at the heart of our day-to-day work.
Please message me if you would like to learn more about Jersey’s well-established and evolving alternative funds proposition.
First published on Linkedin 24 July 2023.