CBDCs and Tokenization will Propel Crypto Adoption: Citi

CBDCs and tokenization will fuel the next mass adoption, says Citi in a report.
CBDCs could be worth $5 trillion by 2030.

In a recent report, Citi says CBDCs and tokenization will power the next outburst in crypto adoption. According to the bank, the crypto industry is approaching a point where blockchain technology will soon have a value worth trillions of dollars, energized by billions of users.

Citi’s views on CBDCs

In its report titled “Money, Tokens & Games: Blockchain’s Next billion Users and Trillions in Value,” analysts argue that the next crypto adoption ingress shall be fueled by tokenizing real-world assets and Central Bank Digital Currencies (CBDCs).

CBDCs can be considered as an alternative to cryptocurrencies like Bitcoin and Ethereum. They are usually pegged to fiat currencies like Dollar or Pound, but the issuing authority or the central bank controls their digital existence. For instance Fed in the US and the Central Bank of England in the UK are monitoring the development and implementation of CBDC systems in their respective country.

Release of this report coincided with the Citi Digital Money Symposium. Ronit Ghose, the bank’s future and finance lead, advocated that a $5 trillion economy could soon be circulating CBDC by 2030.

Advantages and Risks

Per the report, the many advantages, including interoperable payment systems or instruments and the eagerness in developing countries to embrace crypto, will be key for mass adoption. However, certain underlying risks like privacy and the possibility that people would move funds from the traditional sector to CBDCs could hamper their liquidity.

Citi’s Views on Tokenization

Another component that can drive crypto could be tokenization or if the traditional financial assets are somehow brought to the blockchain. If this concept can be pulled, it could be a revolutionary use case, and estimates say that this tokenization could “grow by a factor of 80x in private markets and reach up to almost $4 trillion by 2030.”

Best of Both Worlds

The report suggests that tokenization could bring the best of both worlds. For instance, consider removing the intermediaries in traditional financial markets and filling the gap with the inherent capabilities of crypto and blockchain technology. It could allow different asset classes to exist on a single network.

As both are opposites, a golden balance must be struck for the option to exist. Regulatory clarity needs to be considered; the financial industry could push back because they could not agree upon certain aspects of tokenization.

Implications of CBDCs and Tokenization

The crypto and blockchain industry has evolved greatly since its inception. However, mass adoption remains a pressing challenge. Recent events like the FTX saga, the Terra ecosystem collapse all amid the crypto winter have slowed adoption. CBDCs and tokenization have emerged as solutions and are being considered by governments, but can they be the cornerstone of the next financial revolution? This question might get answers when major economies launch CBDCs for the general public.

Disclaimer:

The views and opinions stated by the author, or any people named in this article, are for informational purposes only and do not establish financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing