BlackRock Considers Tokenizing ETFs on Blockchain After Bitcoin Fund Success

TLDR

• BlackRock is exploring tokenizing ETFs on blockchain following success of its $2.2 billion Bitcoin ETF and tokenized money market fund
• Tokenized ETFs would enable 24/7 trading beyond standard market hours and faster settlement times
• The move requires regulatory approval and would involve funds tied to real-world assets like stocks
• BlackRock already manages the world’s largest tokenized money market fund called BUIDL with $2.2 billion in assets
• JPMorgan calls tokenization a major development for the $7 trillion money market fund industry

BlackRock is considering putting exchange-traded funds on public blockchains, according to sources familiar with the discussions. The world’s largest asset manager is weighing tokenization of funds tied to real-world assets such as stocks.

The move would follow BlackRock’s successful launch of spot Bitcoin ETFs earlier this year. The company has also seen strong performance from its tokenized money market fund, which has grown to $2.2 billion in assets.

Any tokenized ETF rollout would need regulatory approval before moving forward. The sources told Bloomberg that discussions are ongoing about the technical and legal requirements for such products.

Tokenized ETFs could allow trading beyond standard market hours. Traditional ETFs only trade during exchange hours, typically 9:30 AM to 4:00 PM Eastern Time on weekdays.

The blockchain-based funds could also speed up settlement times. Traditional finance settlement often takes two business days, while blockchain transactions could complete within minutes.

BlackRock’s Existing Tokenization Success

BlackRock already operates the world’s largest tokenized money market fund. The BlackRock USD Institutional Digital Liquidity Fund, known as BUIDL, holds $2.2 billion in assets across multiple blockchains.

BUIDL operates on Ethereum, Avalanche, Aptos, Polygon and other blockchain networks. The fund is backed by short-term U.S. Treasuries, repurchase agreements and cash.

The company launched BUIDL as its first experiment with tokenization last year. The fund quickly became the largest tokenized Treasury product globally.

JPMorgan has described tokenization as a major leap for the money market fund industry. The investment bank pointed to initiatives from Goldman Sachs and Bank of New York Mellon as examples of the trend.

Goldman Sachs and BNY are offering tokenized money market funds to clients. Share ownership gets registered directly on Goldman Sachs’ private blockchain under their system.

Broader Industry Movement

The push into tokenized funds comes as traditional finance faces competition from blockchain-based markets. Stablecoins have gained traction as alternatives to traditional banking products.

JPMorgan strategist Teresa Ho said tokenized money market funds will likely continue attracting capital. She noted these products could enhance appeal as collateral in financial markets.

The tokenized funds allow investors to post money-market shares as collateral without losing interest. This provides more versatility compared to posting cash or Treasury securities directly.

Tokenized ETFs could provide access to investors in markets where traditional ETFs are not easily available. Blockchain rails could open these products to global investors through decentralized finance applications.

ETFs have become one of the most popular investment vehicles in recent years. They now outnumber publicly listed stocks according to data from Morningstar.

BlackRock’s exploration reflects a wider trend across finance as banks and asset managers test blockchain technology. Financial firms are experimenting with blockchain rails for bonds, private credit and mainstream equity funds.

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