Adoption of blockchain is nearing an inflection point as central banks ramp up digital currency initiatives and consumers continue to embrace tokenization and Web3 gaming, Citi analysts said in a new report.

The paper, titled Money, Tokens, and Games: Blockchain’s Next Billion Users and Trillions in Value, shares predictions for the blockchain industry over the next years, arguing that central bank digital currencies (CBDCs), tokenized assets and blockchain-based micropayments, including those within metaverse games, will drive mass adoption of the technology, which by 2030, is projected to be measured in billions of users, and trillions of dollars.

According to the report, up to US$5 trillion of CBDCs could be circulating in major economies in the world by 2030, half of which could be linked to distributed ledger technology (DLT). This trend will be driven by the use of tokenized versions of major currencies, such as the euro (EUR), the British pound (GBP) and the Indian rupee (INR), by an estimated two billion individuals, the report says.

Declining use of cash and booming adoption of digital payments are pushing central banks from all around the world to ramp up CBDC research and development.

In Europe, the European Central Bank is currently working with euro area national banks on the introduction of a digital euro, with a bill underpinning the digital euro scheduled to be released in May 2023. Citi analysts predicts the earliest launch date for the digital euro to be in 2026.

The Bank of England, meanwhile, has said earlier this year that a retail, general purpose CBDC will be needed in the UK. The central bank is now in the initial exploration stage, and the work over the next 2-3 years will inform its decision.

Finally, in India, the government is hoping to launch its CBDC by the end of 2023, people familiar with the matter told CoinDesk in February. The Reserve Bank of India is currently running CBDC pilots in both wholesale and retail segments.

In addition to CBDCs, the Citi report names the tokenization of financial and real-world assets as the second driver of mass adoption of blockchain. This application of the technology could be “the killer use case blockchain needs for breakthrough,” the report says, owing to the sheer value the global outstanding equity and fixed income market which stands at more than US$250 trillion.

Currently, tokenization has a marginal market share, representing less than 0.1% in annual issuance, the report says. But by 2030, the practice could grow by a factor of 80x in private markets and reach up to around US$4 trillion in value. The analysts also predict that US$1 trillion of the repo, securities financing and collateral market could be tokenized by then.

Blockchain-based micropayments, including those incorporated into metaverse games, are another trend highlighted in the report.

Gaming is an industry that’s inherently well-suited for blockchain since most gamers are familiar with digital ownership and already own virtual assets, the report says. A 2023 report by DappRadar and BGA Games claims that over 1 million unique active wallets were connected to gaming decentralized applications (DApps) daily in 2022.

With the advent of Web3 gaming, the market could see the 100 million most active gamers shift to blockchain-based games within the next one to two years, the Citi analysts project. This could in turn trigger a rush by mainstream gaming studios to incorporate blockchain and tokenization elements in their video games.

The report notes that several game developers are already pursuing the opportunity. French video game publisher Ubisoft, for example, was the first major studio to release in-game non-fungible token (NFT) items back in 2021. Its latest move was the launch of Rabbids NFT avatars for Ethereum metaverse platform The Sandbox in February 2023.

Asia will likely be the driving force behind the global Web3 gaming industry, owing to the region’s massive gaming community and sector.

With 1.7 billion players, Asia is the largest gaming market in the world, according to a new report by DappRadar in partnership with Japanese cryptocurrency company Pacific Meta.

Asia is also the biggest region by revenues by a massive margin, generating an estimated US$87.9 billion in 2022, and accounting for 48% of the global market, a report by Newzoo, a video games and gamer data specialist, says.