TLDR
- BlackRock explores tokenizing ETFs on blockchain after Bitcoin ETF and $2.2B tokenized fund success
- Tokenized ETFs would enable 24/7 trading and faster settlement times for investors
- Move requires regulatory approval and focuses on funds tied to real-world assets
- JPMorgan views tokenization as transformative for $7 trillion money market fund industry
- Traditional finance firms increasingly adopt blockchain technology for financial products
BlackRock, the world’s largest asset manager, is exploring tokenized exchange-traded funds on public blockchains. Sources familiar with the matter say the company is considering funds tied to real-world assets like stocks.
The exploration follows BlackRock’s successful Bitcoin ETF launches and strong performance of its tokenized money market fund. The company’s blockchain-based treasury product, known as BUIDL, has grown to $2.2 billion in assets.
Any tokenized ETF launch would require regulatory approval from financial authorities. BlackRock is currently navigating the complex regulatory landscape for blockchain-based investment products.
Tokenized ETFs could revolutionize traditional trading by enabling round-the-clock transactions. Current ETFs only trade during standard market hours, limiting investor access to specific time windows.
The blockchain-based funds would also accelerate settlement processes. Traditional ETF settlements take two business days, while blockchain transactions could complete within minutes.
BlackRock’s Tokenization Track Record
BlackRock already operates the largest tokenized money market fund globally. The BlackRock USD Institutional Digital Liquidity Fund holds assets across Ethereum, Avalanche, Aptos, and Polygon blockchains.
BUIDL launched as BlackRock’s first tokenization experiment last year. The fund quickly became the world’s largest tokenized Treasury product, backed by short-term U.S. Treasuries and cash.
The success of BUIDL demonstrates growing institutional appetite for blockchain-based financial products. Major investors have embraced tokenized funds as alternatives to traditional investment vehicles.
JPMorgan strategists call tokenization a transformative development for the money market fund industry. The bank highlights initiatives from Goldman Sachs and Bank of New York Mellon as industry examples.
Industry-Wide Blockchain Adoption
Traditional finance firms increasingly experiment with blockchain technology for various products. Banks and asset managers test blockchain rails for bonds, private credit, and mainstream equity funds.
Tokenized products offer enhanced flexibility as collateral in financial markets. Investors can post tokenized fund shares without losing interest, providing advantages over cash or Treasury postings.
The movement comes as stablecoins gain traction in financial markets. Traditional banks face mounting pressure from blockchain-based alternatives to conventional banking products.
Goldman Sachs and BNY offer tokenized money market funds through private blockchain networks. Clients access these products with share ownership registered directly on blockchain infrastructure.
ETFs have become increasingly popular investment vehicles, now outnumbering publicly listed stocks. The tokenization trend could further accelerate ETF adoption among global investors.
Tokenized ETFs could expand access to markets where traditional ETFs face restrictions. Blockchain rails might enable global investors to access previously unavailable investment products.
BlackRock’s tokenization plans reflect broader industry trends toward blockchain integration. Financial institutions recognize blockchain technology’s potential to streamline operations and expand market access.
The company continues building its digital asset portfolio following Bitcoin ETF success. Tokenized ETFs represent the next phase in BlackRock’s blockchain adoption strategy.
Regulatory clarity remains crucial for widespread tokenized ETF implementation. Financial authorities worldwide develop frameworks for blockchain-based investment products.
