Morgan Stanley warns that the growth of tokenized assets could threaten nearly 30% of traditional wealth management revenue. As these digital instruments expand toward a potential $2.3 trillion valuation by 2030, firms face pressure to adopt blockchain technology or risk losing clients to agile, digital-first competitors.
A new report from Morgan Stanley has highlighted a significant challenge for the traditional wealth management industry. Analysts suggest that the rise of tokenized assets—digital representations of real-world assets like bonds and money market funds on a blockchain—could put between 25% and 30% of wealth management revenue at risk. This revenue primarily comes from net interest income, which is the money firms earn from the spread between what they make on assets and what they pay to clients or depositors.
Traditionally, wealth management firms have relied on this interest income as a stable, core part of their business model. However, as tokenized assets move from experimental projects to mainstream financial instruments, investors are finding more efficient ways to hold and move interest-bearing assets directly. This shift effectively bypasses some of the traditional infrastructure that firms have used for decades to generate revenue.
Projections indicate that the market for tokenized real-world assets could grow from roughly $40 billion today to an estimated $2.3 trillion by 2030. This expected growth is driven by the demand for tokenized money market funds and other short-term financial products, which allow for easier movement of collateral and faster settlement times compared to legacy banking systems.
Despite the excitement surrounding this growth, the report notes that the transition will likely be gradual. Tokenization does not automatically solve persistent problems like how to accurately price private assets or how to ensure deep liquidity. Because of these challenges, institutional adoption of these digital tools may take longer than some supporters initially predicted.
For established wealth management firms, this presents a clear strategic choice. Institutions that choose to invest in building digital capabilities—such as platforms that allow clients to borrow against a wider range of tokenized assets—may be able to capture new segments of the market. Conversely, those that continue to rely solely on traditional infrastructure risk losing both their dominance in asset management and the valuable client data that comes with it.
In the Indian financial context, banks and wealth tech firms are already navigating a shifting landscape as the use of digital assets and blockchain infrastructure gains focus. The transition is not just about technology; it is about how these firms protect their profit margins in a world where digital money can operate more efficiently. As the industry evolves, investors may want to track how much capital legacy firms dedicate toward upgrading their digital infrastructure, as this will likely determine who remains competitive as the financial ecosystem shifts toward blockchain-based models.