Citi Says Mass Adoption of Crypto Will Be Driven by CBDCs, Tokenization – Decrypt

Citi says the industry is finally "approaching a tipping point" and that blockchain technology will soon see "billions of users and trillions of dollars in value."

In their latest report "Money, Tokens, and Games: Blockchain's Next Billion Users and Trillions in Value," Citi analysts suggest that the next influx of cryptocurrency adoption will be driven primarily by the rise of central bank digital currencies (CBDC) and tokenization of real world assets.

CBDCs are alternatives to cryptocurrencies like Bitcoin either Ethereal. Based on current evidence, CBDCs would be pegged to a fiat currency, either the dollar or the poundbut they exist digitally and are controlled by the central bank of the issuing currency, such as the Fed or the Central Bank of England.

During a panel event today during Citi's Digital Money Symposium, which coincided with the release of the report, the bank's future of finance led Ronit Ghose suggested that there will be $5 trillion circulating in the economy in CBDCs "by the end of this decade."

Still, he added the caveat that “most of it will not be blockchain-based, but some will have blockchain interop or be DLT-specific.” DLT refers to distributed ledger technology, which does not necessarily include the use of a blockchain.

This rapid adoption is due to the myriad advantages, according to the report, including an interoperable payment instrument and the general enthusiasm of developing economies.

Still, there are clear risks, in particular the protection of user privacy and users withdrawing deposits from smaller commercial banks to move to a CBDC.

Citi turns to tokenization

Another key driver behind the mass adoption of crypto will be tokenization, or bringing traditional financial assets onto the blockchain.

Citi said that it "could be the killer use case" for blockchain technologies, estimating that tokenization could "grow by a factor of 80x in the private markets and reach a value of almost 4 trillion dollars by 2030".

Cited efficiencies include disintermediation within financial markets, composability with cryptocurrencies, and ultimately a “shared 'gold-spring' infrastructure” on top of which different asset classes could exist on the same network.

Naturally, there are clear obstacles on the way to this "golden" standard.

Regulatory clarity is perhaps the greatest, with few jurisdictions offering a clear framework for adopting traditional on-chain assets.

There may also be pushback from those in the financial industry, Citi reports, as the disintermediation offered by such technologies could make their jobs obsolete.