Citigroup Says Crypto Nearing 'Inflection Point,' Blockchain To See 'Trillions Of Dollars In Value'

Analysts at Citigroup, a diversified financial services holding company, believe cryptocurrency is "approaching an inflection point" and blockchain technology will eventually see "billions of users and trillions of dollars in value." They also think central bank digital currencies (CBDCs) will drive the mass adoption of crypto.

"We believe we are approaching an inflection point, where the promised potential of blockchain will be realized and be measured in billions of users and trillions of dollars in value," Citigroup noted in a March 2023 report titled "Money, Tokens and Games: Blockchain's Next Billion Users and Trillions in Value."

It added that "successful adoption will be when blockchain has a billion-plus users who do not even realize they are using the technology."

The report also claimed that "blockchain promises something that is in parts a replacement of a current functioning system and in parts new capabilities and operating models."

"From a technology specification perspective, blockchain needs to have transaction scale and throughput, strong guarantees of security, on-chain identity, privacy, Oracles, bridges and good user experience," it said further.

The analysts think the next wave of cryptocurrency adoption will be fueled primarily by the rise of CBDCs as well as the tokenization of real-world assets

"This is likely to be driven by the adoption of central bank digital currencies (CBDCs) by large central banks as well as tokenized assets in gaming and blockchain-based payments on social media," the analysts stated in the report.

CBDCs are proposed alternatives to crypto like Bitcoin and Ethereum and, based on trials, are pegged to a fiat currency where they are issued. Moreover, they exist digitally and are controlled by the currency's central bank, like the Federal Reserve in the U.S.

As per the report, the analysts predicted that approximately $5 trillion CBDCs will be circulating in major countries in the world in eight years, "half of which could be linked to distributed ledger technology."

Citigroup also noted that these CBDCs will enable people to interact and experiment with cryptocurrencies in a digitally secured environment because of the support of the state, which is a positive factor for the overall adoption of blockchain technology.

According to Citigroup, tokenization could be the "killer use case" that will drive the breakthrough of blockchain technology.

"Tokenization of financial and real-work assets could be the killer use case driving blockchain breakthrough with tokenization expected to grow by a factor of 80x in private markets and reach up to almost $4 trillion in value by 2030," Citigroup analysts said in the report.