Asset tokenization volume and share by region. Source: Bank of Korea
As the asset tokenization market rapidly expands, led by the United States, central bank digital currency (CBDC) or bank deposits should be prioritized as settlement assets, according to a new analysis.
The Bank of Korea (BOK) released a report Tuesday titled “Domestic and Global Asset Tokenization Status and Future Policy Tasks,” outlining the view.
Asset tokenization refers to converting ownership or stakes in physical assets such as real estate, bonds, stocks, and artwork into digital token securities for trading.
According to the BOK, the global asset tokenization market grew 93% in 2024 and 169% last year, reaching $50.37 billion (about 75 trillion won) as of the end of March this year. By asset type, credit asset tokens, including mortgage and corporate loans, accounted for the largest share at $25.65 billion, or 51%. Money market fund (MMF) and government bond-based tokens followed at $14.26 billion (28%), with commodity tokens covering precious metals and energy at $7.3 billion (14%). By country, the United States dominated at $34.1 billion (65.2%), followed by Europe (14.5%) and regulatory havens (14.4%).
Korea’s market remains in an early stage, combining distributed ledger technology with fractional investment in assets such as music copyrights and real estate. The foundation for issuing and distributing token securities, however, was established through amendments to the Electronic Securities Act and the Capital Markets Act in February this year. Cumulative domestic fractional investment stood at about 640 billion won as of January.
Tokenization offers several advantages. It shortens settlement cycles by integrating the entire asset trading process on a distributed ledger, and reduces counterparty risk through atomic settlement via smart contracts. It also eases temporal and geographical constraints by enabling 24/7 trading.
On the other hand, liquidity mismatches between tokenized and underlying assets and leverage expansion through asset rehypothecation could trigger massive sell-offs and chain deleveraging during market instability. “Particularly if linkages with the stablecoin market strengthen, shocks could spread to traditional financial asset markets such as short-term government bonds and deposits, which serve as stablecoin reserve assets,” said Park Sung-hoon, a manager at the BOK’s Non-Traditional Finance Analysis Team. Market fragmentation from a proliferation of blockchain networks could also disperse liquidity and weaken price discovery functions, he added.
The BOK recommended activating token securities for non-standard assets where market demand has been confirmed, and establishing a phased expansion roadmap that reflects the characteristics of each traditional financial asset to help the domestic market take root.
Finally, the report stressed that central bank money, CBDC, or bank deposits (including deposit tokens) should be primarily used as settlement assets for tokenized assets to maintain the singleness of money and ensure reliability. “Stablecoins can be used in a complementary manner only if strict regulatory compliance, redeemability, and stability of reserve assets are sufficiently secured,” Park said.