Tokenized funds go mainstream: Asia and the US lead the adoption race

Author: Calastone, Global Custodian

Compiled by: Block unicorn

The mainstreaming of tokenized assets is rapidly developing, with asset management companies around the world becoming increasingly optimistic about implementation timelines and internal adoption capabilities, according to a new survey conducted by Calastone, the largest fund network globally, in collaboration with Global Custodian. The survey indicates that companies in Asia and the United States are leading in the launch of commercially viable tokenized products.

Asian Companies Hold Optimistic Views on Recent Launches of Tokenized Funds

The survey data clearly indicates that, in the context of intensifying competition, incorporating tokenized funds into product offerings is a significant agenda for asset management companies worldwide. The vast majority of participants emphasized that they expect this to become a commercial reality within three years or less.

Further analysis of the data reveals that, overall, companies headquartered in the United States and Asia are the most optimistic about launching tokenized products in the short term, with 67% and 61% of survey participants, respectively, believing it is possible within a year. In the Asia region, nearly 86% of companies indicated they expect to achieve this within three years.

Asia and the U.S. Lead in Fund Tokenization

When asked about their current attitudes toward tokenization and its potential impact on daily operations, only a small number of respondents (about 10%) indicated that they currently do not see a role for this technology in their business. Perhaps more impressively, over 50% of respondents claimed they are exploring its applications in specific areas. In terms of actively implementing tangible tokenization projects, the U.S. and Asia are again leading at the regional level. In both geographical locations, nearly 40% of companies stated they are actively pursuing these projects in their business.

Despite many participants having multiple products across asset classes, the data seems to suggest that while tokenization projects are being applied within investment opportunity portfolios, companies engaged in fixed income and private assets are the most advanced in driving implementation.

"Our clients in Asia not only anticipate the rise of tokenized funds, but they are actively paving the way for it. This survey shows that asset management companies in the region are eager to leverage the benefits of tokenization and are preparing for implementation at an impressive pace, having made scalable implementations in product development, distribution, and trading," said Justin Christopher, Head of Asia at Calastone. "The proactive efforts made by both the government and the private sector to form collaborative initiatives, such as Singapore's Project Guardian, have played a key role in supporting Asia's leading position on the global stage."

Providing Personalized Investment Experiences for Asia's UHNW

Overall, the survey confirms a growing consensus regarding the many perceived benefits of tokenization for clients, ranging from cost reduction and enhanced liquidity to access to new asset classes and the creation of more personalized investment experiences. When asked to choose what they personally believe are the two most important benefits, opinions were generally balanced, with about a quarter of the overall responses pointing to each of the four options.

While Asian respondents indeed view cost reduction as the greatest benefit of tokenization, compared to their regional peers, these participants are more likely to indicate that developing more customized investment solutions is a key advantage, particularly to better serve ultra-high-net-worth (UHNW) clients. Approximately 25% of companies in the region indicated this as an important consideration, compared to 23% globally.

External Factors Are the Biggest Barriers to Digital Asset Adoption

Optimistically, the majority (67%) of asset management companies indicated that they expect to leverage existing technologies and expertise to manage the launch of tokenized investment tools. From a practical standpoint, this suggests that companies' confidence in executing their tokenization strategies is rising in the coming years. Part of the reason may be the growing internal understanding and knowledge of this field, as well as the expanding capabilities of technology partners and administrative service providers in this area.

The most common barrier for institutions participating in digital assets is the lack of central bank digital currency (CBDC), with over 80% of respondents citing it as the most prominent first or second barrier for the industry, followed by regulatory uncertainty. This seems to support the notion that companies are increasingly able to manage or overcome challenges directly or in collaboration with partners.

Looking ahead, Christopher explained, "Institutional adoption of digital assets in Asia is undoubtedly on the rise, and companies' capabilities in managing and allocating this transformation are also improving. However, this process is not without challenges. To fully unlock the potential of the digital asset ecosystem, we continue to advocate for broader collaboration within the industry."

Survey Methodology

The data cited in this press release is based on findings from a global survey conducted by Calastone in close collaboration with Global Custodian in the third quarter of 2023, aimed at assessing the fund industry's adoption and attitudes toward asset tokenization.

Among the 141 participants in the survey, the majority (80%) were asset management companies, while the remainder were other industry stakeholders, including fund administrators, custodians, and management companies (Mancos). To ensure a broad regional perspective, respondents came from the United States (16%), Asia (35%), and the UK and Europe (49%).

Data was collected through an online survey, including multiple-choice and constructed response questions, with the figures cited in the press release derived from an analysis of this data.