Analysts at global investment Citi bank believe that the digital asset space is approaching an inflection point that could eventually lead to the mass adoption of blockchain technology. This report focuses on the rise of central bank digital currencies (CBDCs) and the tokenization of real-world assets as potential drivers of this transition.
CBDCs could onboard billions of users to blockchain
Citi analysts predict that the adoption of central bank digital currencies (CBDCs) by large central banks, as well as tokenized assets in gaming and blockchain-based payments on social media, could drive the mass adoption of blockchain technology. The report estimated that more than $5 trillion of CBDCs could be circulating globally by the end of this decade, giving almost 2 billion people the opportunity to experiment with digital currency.
RWA tokenization could reach $4T in value by 2030
Citi analysts also suggest that the tokenization of real-world assets could drive the adoption of distributed ledger technologies like blockchain. They predict that tokenization could grow by 80x in private markets and reach almost $4 trillion in value by 2030. Tokenization is the process of representing physical and traditional financial assets as digital tokens on a blockchain. Tokenized assets can be bought, sold, and traded just like securities, offering a range of benefits such as increased liquidity, faster settlement, lower costs, and bolstered risk management.
Blockchain technology must improve to be successful
While Citi analysts are optimistic about the potential for blockchain adoption, they note that the technology needs to improve significantly to be successfully adopted into the mainstream. Specifically, blockchain needs transaction scale and throughput, strong security guarantees, on-chain identity, privacy, Oracles, bridges, and good user experience.
Major banks exploring tokenization
Tokenization has also seen some adoption among major banks. A group of 12 banks, including the Bank of America and Citi, are exploring tokenizing liabilities. This is a positive sign for the potential of tokenization and blockchain technology.
The report suggests that blockchain technology is nearing an inflection point that could lead to mass adoption. The rise of CBDCs and the tokenization of real-world assets are potential drivers of this transition. However, for blockchain technology to be successful, it needs to improve significantly in various aspects, such as transaction scale and throughput, strong security guarantees, and good user experience. Despite these challenges, the potential benefits of blockchain technology are significant, and it is likely to see continued growth and adoption in the coming years.