Tokenization in Europe — Current state and future outlook

Key assumptions

For this study, we analyzed the research conducted by third parties and combined it with data from relevant market participants. To calculate the market size for tokenized assets in Europe, the underlying key assumptions are:

1. Market share of crypto currencies in Europe

CoinMarketCap thoroughly tracks the history of the global market size of crypto currencies. However, it is not easy to determine how this is distributed among the various continents, in our case Europe. Based on the extensive studies of Cambridge Center for Alternative Finance¹²³, latest statistics⁴⁵⁶, and data⁷⁸, we were able to determine that ~55 million Europeans (~7,5% of the European population) hold or use crypto currencies. Furthermore, our results show ~40% of global crypto currency users come from Europe. As a result, Europe is leading concerning the number of users worldwide. However, with regard to the global market capitalization in crypto currencies, Europeans only cover ~25%.

2. Outlook of market size for crypto currencies

The market for crypto currencies is experiencing a further bull market in recent months. As a result, the price of the leading crypto currencies, Bitcoin and Ethereum, is climbing almost unstoppably from an all-time high to an all-time high. Additionally, there is a steady stream of positive news within the industry providing a significant tailwind to the market. This includes, for example, PayPal’s strong interest in establishing itself in the crypto segment, which can be observed in the acquisition of digital asset security firm Curv.⁹ Moreover, even the giants of the traditional financial world such as Goldman Sachs¹⁰ and JP Morgan¹¹ can no longer ignore their customers’ demand to access digital assets. Another step that shows how advanced the mainstream adoption of digital assets has come was certainly the IPO of Coinbase with a market capitalization of over 80 billion US dollars.¹²

3. Market share of security token in Europe

The market for security tokens sparked a few years ago, no earlier than 2017. Since then, the field of security tokens has seen rapid growth. Regulators worldwide adopted the new form of financial instruments into existing regulation. The process started in early 2020 with the financial license introduction for custody of digital assets in Germany and other EU member-states.

4. Outlook of market size for security token

The security tokens market is evolving dynamically and can still be considered to be in its infancy phase. In 2017 only five reported security tokens were issued. This number has increased to more than 100 in 2020. Our projections forecast a continuous growth within the next five years up to a total market volume of more than 918 billion Euro by 2026 in Europe alone, including FIAT-backed stablecoins.

Conclusion

The overall market of digital assets will keep growing at a swift pace. While the market currently consists almost exclusively of crypto currencies in terms of market capitalization, the area of security tokens will grow strongly in the coming years. Progressive regulation in countries like Germany and the EU-level will lead to Europe being the global leader in security tokens. Based on our data model, which for the first time does not rely on approximations such as GDP, the volume of security tokens will exceed the volume of crypto currencies for the first time in 2026.

TL;DR

The market for digital assets today:

  1. 55 million crypto currency users (~7,5% of the European population)
  2. 40% of global crypto currency users come from Europe
  3. 25% of the global market capitalization in crypto currencies held by Europeans
  4. Security token market is still in its early days with major regulation upcoming
  1. The total market capitalization of digital assets will be 1,820 billion Euro
  2. Security token volume (50.39%) will be larger than crypto currencies (49.61%)
  3. Tokenized stocks will contribute with 32.77% to the security tokens market

Remarks

Please note that this is a current market overview as of May 2021. You are welcome to contact us for additional information, which we will then be happy to consider.

Authors

Benjamin Schaub is the Head of Digital Hub at Plutoneo. His interests include blockchain use case development and integration in the financial industry as well as crypto custody. Besides, he works as a senior consultant at INTAS.tech, a blockchain consulting firm that the Frankfurt School and Plutoneo have set up. You can contact him via mail (b.schaub@plutoneo.com) or on LinkedIn (www.linkedin.com/in/benjamin-schaub).

References

1 Cambridge Center for Alternative Finance: “Global Cryptocurrency benchmarking study”, released 2017.

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