The asset management giant is betting on ETF tokenization after the success of its Bitcoin-based products.
BlackRock, the world’s largest asset manager, is considering the implementation of ETF tokenization through blockchain technology. According to sources close to internal discussions reported by Bloomberg, the financial group is studying ways to digitize its exchange-traded funds, capitalizing on the success achieved with its spot Bitcoin ETFs.
The move would follow the strong performance of the company’s crypto products, which have demonstrated market appetite for investment solutions based on digital assets.
How ETF tokenization works
ETF tokenization converts shares of traditional funds into digital tokens recorded on a blockchain. This technological transformation could offer investors several advantages:
- 24/7 trading: tokenized funds could be traded beyond traditional market hours;
- DeFi collateral: use as collateral in decentralized finance applications;
- transparency: full traceability of transactions on the blockchain;
- efficiency: lower operational costs and faster settlement times.
However, any tokenization initiative will need to overcome significant regulatory hurdles, given the still-evolving framework for digital assets.
BlackRock leading in tokenization
BlackRock’s interest in tokenization is not new in the financial landscape. The group already manages the world’s largest tokenized money market fund: the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), which, according to RWA.xyz data, oversees $2.2 billion distributed across multiple blockchains including Ethereum, Avalanche, Aptos, and Polygon.
JPMorgan’s view
JPMorgan has described tokenization as a “significant leap” for the $7 trillion money market fund industry. The investment bank backs an initiative jointly launched by Goldman Sachs and Bank of New York Mellon, which BlackRock is expected to join from the outset.
The project will allow BNY clients to access money market funds with ownership of the shares recorded directly on Goldman Sachs’ private blockchain.
Teresa Ho, JPMorgan strategist, predicts that tokenized money market funds will continue to attract capital to the industry while simultaneously increasing their appeal as collateral. This evolution could preserve “cash as an asset” against the growing influence of stablecoins, according to Ho. “Instead of posting cash, or posting Treasurys, you can post money-market shares and not lose interest along the way. It speaks to the versatility of money funds,” the JPMorgan strategist said.
