The market opportunity of tokenization is unprecedented—it has the potential to encompass virtually any asset. With the value in onchain applications sitting in the hundreds of billions of dollars, there is potential for significant growth in converting traditional assets into a superior, tokenized form.

However, to capitalize on this opportunity, stakeholders in the financial services industry need to bridge their knowledge gap to be able to securely interact with the tokenization sector. By understanding the underlying opportunities, they can strategically position themselves to benefit from tokenization and future-proof their digital asset strategy.

This Chainlink industry report, featuring contributions from BCG, 21Shares, Paxos, and Backed, examines the trillion-dollar tokenization megatrend and explores how asset managers and financial institutions can use the Chainlink platform as their gateway to the tokenization opportunity.

The Tokenization Market Opportunity

Blockchains were initially conceived as a parallel financial system to challenge the traditional status quo, but over time, digital assets began mirroring the traditional financial system, and the traditional finance sector started to fully realize the advantages of the technology. Consequently, blockchains are evolving from a competing model to an integral component of the existing financial ecosystem, and traditional assets and blockchain-based digital assets are converging into a single global financial ecosystem.

“We see a growing appeal of tokenized assets among institutional investors and their clients. This presents a substantial market opportunity for the traditional asset management sector, as a significant amount of capital is ready to be enhanced by the tokenization market. The time has come for asset managers to start actively engaging with this expanding industry.“—Kaj Burchardi, Managing Director, Global Lead of Emerging Technology Team, BCG Platinion

Tokenized assets, a subclass of digital assets, are blockchain-based digital tokens that represent physical or traditional financial assets, such as cash, debt, securities, commodities, real estate, and more. This approach offers opportunities for enhanced liquidity, transparency, risk management, and compliance. Yet, the complexity and novelty of these assets also pose challenges, particularly in evaluating the associated security and risk considerations.

As a result, many asset managers find themselves unable to construct or offer comprehensive digital asset products involving tokenized assets. With clients increasingly seeking exposure to tokenized assets, asset managers who are unable to incorporate these assets into their product offerings securely risk falling behind their competitors.

This report provides asset managers with critical industry insights into:

• The tokenized asset landscape, including an exploration of their benefits, a taxonomy for better classification and understanding, an outline of the tokenization process, and case studies that demonstrate the potential of this evolving asset class.
• The risks of tokenized assets, providing perspective and guidance around identifying and navigating the risks associated with the technology underpinning tokenized assets, including critical security and programmability considerations.
• Chainlink as key infrastructure and a risk filter for tokenized assets, featuring a highly secure and fully featured technology platform that enables financial institutions to develop customized, flexible, compliant, and future-proof blockchain applications and tokenized assets.

By gaining a better understanding of the technological complexities of the tokenized asset sector and adopting Chainlink’s risk management infrastructure into their tokenized asset strategy, asset managers are empowered to make more informed decisions in their asset development and selection process. This strategic approach not only prepares them to effectively meet the current demand but also positions them to better capitalize on the forthcoming market opportunities in tokenized assets.

“Tokenization offers asset managers significant opportunities, but its broader adoption has been historically constrained by the lack of high-quality infrastructure capable of addressing the technological challenges associated with integrating the technology with traditional capital markets. […] Chainlink is setting a new standard for bringing utility, security, and transparency to tokenized assets, supporting asset managers looking to future-proof their strategy for the growing tokenization market.“—​​Eliézer Ndinga, VP, Head of Strategy and BD, Digital Assets, 21Shares

Building the Tokenized Asset Economy With Chainlink

The coming wave of tokenization in the asset management sector signifies a seismic shift in market infrastructure for the financial services industry. There has never been a better time for asset managers and financial institutions to position themselves at the forefront of this significant shift, capturing a major market opportunity and future-proofing their digital asset strategy.

To find out how your organization can benefit from Chainlink infrastructure for powering tokenized assets, reach out to our team.