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Tokenization market in India and global markets in 2024- What to look forward to?

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By Sandeep Sethi VP, India & South Asia, Wibmo (A PayU Company)

In today’s world, innovation is driving change across every aspect of our lives, and finance is no exception. The past few years have witnessed a remarkable surge in digital and card transactions, offering unprecedented convenience to consumers worldwide. However, this convenience comes with a danger: the escalating threat of online fraud. As our reliance on digital payment methods grows, so do the strategies deployed by cybercriminals to exploit vulnerabilities in our financial systems.

The threat of card fraud looms large, encompassing a multitude of nefarious schemes and strategies. Whether it’s phishing emails designed to deceive unsuspecting victims, sophisticated data breaches compromising sensitive information, or physical theft of cards from mailboxes, the avenues for fraud are diverse and developing every day. Moreover, the emergence of virtual cards adds another layer of complexity to this already intricate landscape. From fraudulent online purchases to unauthorized transactions made over the phone or through text messages, card fraud casts a pervasive shadow over our digital interactions. As we navigate this increasingly complex terrain, the need for robust security measures and innovative solutions becomes paramount. In this context, technologies such as tokenization emerge as invaluable tools in the ongoing battle against fraud. With its roots deeply embedded in blockchain technology, tokenization has the potential to revolutionise various sectors, including finance.

What is Tokenization?
Before we discuss the future prospects of tokenization, let's understand the basics of the term. In
layman's language, tokenization is the process of replacing sensitive data, such as credit card numbers,
with unique identifications known as tokens. By converting these assets into tokens, they become easily
divisible, tradable, and accessible to a global audience, thereby unlocking liquidity and democratizing

India’s thrust towards Tokenization
In India, the journey towards embracing tokenization started in 2022. With the government’s push towards digitalization and innovation in fintech, the regulatory landscape is gradually becoming conducive for blockchain-based initiatives. The Securities and Exchange Board of India (SEBI) has shown openness to exploring blockchain applications in capital markets, paving the way for tokenized securities. Additionally, initiatives like the National Digital Asset Framework (NDAF) aim to provide clarity and guidelines for the tokenization of assets, fostering a robust ecosystem for blockchain startups and enterprises.

Global adoption and market trends

On the global front, the adoption of tokenization is reaching new heights. Traditional financial
institutions are increasingly recognizing the potential efficiencies and cost savings offered by blockchain-
based solutions. The tokenization of assets not only streamlines processes like trading and settlement
but also enhances transparency and security, mitigating risks associated with fraud and manipulation. As
per a report, the global tokenization market is expected to grow from $2.39 billion in 2022 to $9.82
billion by 2030. North America will likely continue to lead the global market with a share of 37.24% in
2022. The rise of decentralised finance (DeFi) platforms has fueled the demand for tokenized assets, as
users seek alternative investment opportunities and yield-generating assets beyond traditional markets.

Key drivers and opportunities
Regulatory clarity: There must be continuous efforts by regulators to provide clear guidelines and
frameworks for tokenized assets which will instill confidence among investors and businesses leading to
greater adoption. Institutional Participation: As institutional investors increasingly dive into digital assets, the tokenization market stands to benefit from greater liquidity and institutional-grade infrastructure.

Interoperability and standards: Standardization efforts and interoperability solutions across different
blockchain networks will facilitate seamless token transfers and interoperability, unlocking new
possibilities for asset tokenization.

Emerging technologies: Advancements in technologies like artificial intelligence (AI), Internet of Things
(IoT), and 5G networks can synergize with tokenization, enabling innovative use cases such as tokenized
IoT data streams or AI-driven asset management.

Global economic rrends: Macroeconomic factors such as geopolitical shifts, inflationary pressures, and
the growing demand for digital assets as a hedge against traditional market risks can further propel the
tokenization market’s growth.

The way forward
Despite the promising outlook, many challenges persist in the tokenization landscape. Regulatory uncertainties, cybersecurity concerns, and interoperability issues remain key hurdles that must be addressed to unlock the full potential of tokenized assets.

The tokenization market in India and global markets is poised for exponential growth, fueled by technological innovation, regulatory support, and shifting investor preferences. From unlocking liquidity in traditionally illiquid assets to democratising access to investments, tokenization can transform the financial landscape to a great extent.

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