OECD report: Tokenization faces challenges, liquidity and network effects are key obstacles

According to a report by the Organisation for Economic Co-operation and Development (OECD), there are several challenges facing the wider adoption of tokenization, despite the benefits it brings such as improved efficiency, securities settlement, and innovation opportunities. The report highlights the lack of a sufficient investor base as the main obstacle, leading to insufficient liquidity and cautious attitudes towards tokenization by issuers. The issuance of sovereign bonds can help promote tokenization development, as seen in the case of Slovenia.

At the same time, the OECD emphasizes that quasi-sovereign issuers such as the World Bank and the European Investment Bank are more active, but liquidity problems are often solved by integrating with traditional systems, which also weakens the potential advantages of tokenization.

Another challenge is the "chicken and egg" problem of network effects, where investment is difficult to prove value before network effects have become apparent. In addition, many institutions face technical debt and lack funding to upgrade to distributed ledger technology (DLT).