Citi has claimed that the crypto industry is nearing a turning point that would see the number of users surge to a billion and the total market capitalization hit trillions of dollars.
Citi analysts’ latest report, titled ‘Money, Games, and Tokens: Blockchain’s Next Billion Users and Trillions in Value,’ suggests that the tokenization of real-world assets and the rise of CBDCs (Central Bank Digital Currency) will be the key drivers of crypto mass adoption.
Citi Explains How CBDCs Will Drive Mass Adoption
CBDCs are tokens pegged to fiat currencies like the pound and the US dollar. They are issued and controlled by a country’s central bank, such as the Central Bank of England and the Federal Reserve.
On Thursday, as the analysts continued sharing their report at the Citi Digital Money Symposium, the financial institution’s head of the Future of Finance department, Ronit Ghose, tweeted that CBDCs worth $4.5 trillion will be circulating in the economy by 2030.
However, he noted that most of these CBDCs won’t have blockchain components, and some might be DLT-specific. In simple terms, DLT is a distributed ledger technology that doesn’t require adopting a blockchain.
Ghose says the increasing interest from developing countries will fuel the surge in CBDCs. Most governments are now considering these digital currencies to be more effective in processing transactions than the traditional financial system.
Citi’s Take on Tokenization
According to Citi analysts, onboarding traditional financial assets on the blockchain will fuel mass crypto adoption. The bank believes this is the killer use case for the nascent technology. It predicts tokenization will grow 70x in private markets over the next ten years.
Citi says tokenization will help cut out intermediaries within financial markets, and composability with crypto will also be made possible.
But there are roadblocks to bringing traditional financial assets on-chain. For example, there are no clear regulatory frameworks that guide the integration of these assets with blockchain.
In addition, some players in the financial sector would likely oppose that move because elimination of middlemen would cause their jobs to be obsolete.