- Fidelity plans to tokenize its $5.3B money market fund on Ethereum by May 30.
- Tokenized U.S. Treasury market surged 500% YoY to $4.77B.
- BlackRock’s BUIDL holds $1.5B; Franklin Templeton’s on-chain fund at $689M.
Fidelity Investments is joining the tokenized asset space by submitting with the SEC to offer a blockchain-based money market fund on Ethereum.
The fund, called the Fidelity Treasury Digital Fund (FYHXX). Which will consist of U.S. Treasury securities and cash and utilize blockchain technology for its transfer agent. Subject to approval, the fund will be live on May 30th, which is a huge milestone for traditional finance adopting tokenization.
The Rise of Tokenized Treasuries
Fidelity’s action follows an increasingly popular trend of financial institutions venturing into blockchain for real-world asset (RWA) tokenization.
Total U.S. Treasury market tokenized has grown close to 500% year on year to $4.77 billion. BlackRock is leading this space with its BUIDL fund, which has $1.5 billion in assets. While Franklin Templeton’s tokenized fund has $689 million.
Why Tokenization
Tokenization of assets such as Treasuries facilitates quicker settlements, 24×7 trading, and lower dependency on intermediaries.
As much as skepticism regarding the viability of tokenizing some assets has surrounded this issue. Big institutions are now increasingly adopting blockchain-based financial instruments.
The SEC filing suggests possible future peer-to-peer trade, further enhancing accessibility.
Regulatory uncertainty that once deterred institutions from moving into the sector has been dispelled by BlackRock’s success and changing U.S. policy. Visa, Mastercard, and JPMorgan have all introduced blockchain programs, indicating increased confidence in the future of tokenization.
Challenges and Outlook
While tokenization provides efficiency and liquidity advantage, critics reason that certain assets—such as real estate and private equity do not lend themselves to blockchain. But the Boston Consulting Group estimates tokenized fund assets could grow to $600 billion by 2030, from $2 billion currently.
Fidelity’s move into this space reflects the traditional finance industry’s embrace of blockchain technology. Its Bitcoin and Ethereum ETFs are already booming, and the company’s entrance into tokenized Treasuries might further catalyze mass adoption of digital assets.
In a rush by institutions to tokenize financial markets, Fidelity’s Ethereum-based fund is yet another landmark in bringing traditional and decentralized finance together.
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