Tokenisation Threat: Morgan Stanley Warns of 30% Revenue Hit for Wealth Managers
Morgan Stanley warns that digital assets and tokenisation could threaten a huge chunk of wealth management revenue by 2030.
The landscape of global finance is on the verge of a seismic shift. According to a recent report by Morgan Stanley, the rise of tokenisation wealth management revenue streams are under significant threat, with the adoption of digital assets potentially jeopardizing 25-30 per cent of total earnings for wealth managers.
The report highlights a growing tension between traditional financial models and the emergence of blockchain-based assets. As stablecoins and traditional financial instruments are converted into digital tokens on blockchain networks, the very foundation of how investments are held, transferred, and used as collateral is being rewritten.
The Net Interest Income Crisis
At the heart of the concern is the "net interest income," a critical revenue pillar for wealth management firms. Morgan Stanley points out that the proliferation of digital forms of money puts direct pressure on these economics. Because tokenisation changes the way money moves and is stored, the traditional interest-earning models that firms rely on could be eroded.
However, the report suggests a silver lining: while traditional interest income may shrink, wealth managers have a unique opportunity to pivot. By allowing clients to borrow against a much broader and more diverse set of digital assets, firms may be able to offset these losses.
A Trillion-Dollar Projection
The scale of this digital transition is staggering. Morgan Stanley projects that tokenised real-world assets—which include equities and bonds represented as digital securities—could explode from their current valuation of approximately USD 40 billion to a massive USD 2.3 trillion by 2030.
Several key drivers are expected to fuel this exponential growth, including:
- Increased movement of collateral across different platforms.
- The rise of tokenised money market funds.
- The development of short-duration financial instruments.
- Simplified and faster access to global securities.
Opportunities for Asset Managers
For those looking to survive the disruption, the report suggests that the immediate opportunity lies in the creation and distribution of innovative investment products. Specifically, tokenised equities and money market funds could allow firms to tap into a wider pool of investors via digital platforms.
Tokenised money market funds are particularly promising, as they enable digital institutions to hold interest-bearing assets directly on blockchain networks, removing the need to migrate away from their existing digital infrastructure.
The Reality Check: Liquidity and Risks
Despite the optimism surrounding blockchain, Morgan Stanley offers a cautionary note regarding private markets. The report argues that expectations for blockchain to drastically improve liquidity in these markets are currently overstated. The reason is simple: tokenisation is a technological layer; it does not solve the fundamental challenges of pricing and liquidity inherent in private assets.
Adapt or Fade Away
The report concludes that wealth managers are standing at a crossroads. Those who proactively invest in new capabilities and offer advanced services—such as lending against a wider array of digital assets—will likely strengthen their market position.
Conversely, firms that hesitate to adapt face a grim reality: the risk of losing both their assets and critical client data to agile, emerging digital platforms that are already providing these modern financial services.