Key Facts

• Asset managers are moving ahead with tokenized fund products despite unresolved questions around regulation, trading infrastructure, and market structure, driven by investor demand and concerns about missing an early opportunity in blockchain-based finance.
• BNY's global head of exchange-traded funds (ETFs), Ben Slavin, said firms are working on different variants to effectively tokenize ETFs, with many clients feeling an opportunity to raise assets and a 'FOMO' effect driving them to get in early.
• The trend extends beyond cash-management products, with major firms like BlackRock, Franklin Templeton, and others exploring ways to place traditional financial products on blockchain rails, allowing fund shares to trade as digital tokens.
• Issuers face growing reputational risks as third parties create tokenized versions of existing ETFs that can trade outside traditional financial markets without their involvement, creating an opaque and unregulated market.
• Wall Street believes that blockchain networks could eventually become a new distribution channel for traditional investment products, potentially reducing settlement times and expanding access to global investors.