BlackRock Is Reportedly Boarding the Tokenized ETF Train
The New York-based firm is planning to launch some of the first tokenized ETFs, according to a report.
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Tokenization may be the next frontier for exchange-traded funds.
BlackRock, the world’s largest asset manager, is reportedly laying the groundwork to bring ETFs onto the blockchain, according to Bloomberg. While a company spokesperson said the firm is “regularly talking to clients about the promise and potential of tokenization,” industry analysts said the move feels inevitable given the industry-wide shift toward digitization. If successful, it could change how investors access, trade and settle securities.
“The industry has been talking about this for a few years, and there’s already some similar products out there,” said Roxanna Islam, VettaFi’s head of sector and industry research. “So it’s not necessarily a surprise that this would happen next.”
Tokens On the Table
ETF tokenization could allow shares to be traded outside of market hours, open up greater access to international investors and lead to more “operational efficiencies” for issuers, Islam said. Franklin Templeton and WisdomTree already run a tokenized money market fund and a tokenized digital mutual fund, respectively, but no tokenized ETFs are currently traded on any of the main exchanges.
BlackRock also has a tokenized money market fund — the BlackRock USD Institutional Digital Liquidity Fund, or BUIDL, which trades short-term Treasurys and repurchase agreements — but it’s only available to institutional investors. Islam said tokenization could broaden ETF access for retail investors. “It’s kind of like Bitcoin. It’ll be more decentralized,” she said. “It’s supposed to open access up a little bit more to the broader public.”
BlackRock’s move likely reflects surging retail demand for its digital assets, namely:
- BlackRock’s spot bitcoin ETF, the iShares Bitcoin Trust ETF (IBIT), which has garnered $87 billion in assets since its launch last year.
- The tokenized fund, BUIDL, which also launched last year and now manages around $2 billion in assets.
Chained Up. Tokenization has been the word on Wall Street, with everything from private credit to real estate assets hitting the blockchain. Still, whether ETFs will join the fray remains up to regulators. Just last week, Nasdaq petitioned the Securities and Exchange Commission for permission to tokenize US securities, a move its SVP of North American Markets Chuck Mack said in a statement was a reflection of both market demand and the fact that we’re living “in a digital world.”
