BlackRock’s plan to tokenize its flagship iShares ETF lineup has triggered a bubbly response from the crypto community, with analysts calling the development a critical catalyst that could potentially lift the crypto market out of its prolonged downturn.
Latest developments reveal that BlackRock is in active discussion with the US Securities and Exchange Commission (SEC) to move its flagship iShares ETFs onto blockchain rails.
If it succeeds, this could lead to the creation of programmable, 24/7-settling ETF tokens that can be used as collateral in DeFi protocols. However, this is still an uncertainty, with BlackRock’s CFO Martin Small acknowledging that he could not determine whether the process would be completed “in 90 days or 12 months”.
Tokenized ETFs promise 24/7 settlement and DeFi integration
For iShares ETFs (representing holdings in stocks, bonds, and other traditional securities), tokenization would allow investors to trade, transfer, or use these assets as collateral in DeFi lending protocols without having to leave their digital wallets.
Bitwise Chief Investment Officer, Matt Hougan, considers this move a transformative one, saying that it is “one of the key narratives to lead the market out of a bear market” and emphasizing that the development is “very positive for Layer one blockchains and the decentralized finance (DeFi) sector.”
As such, tokenized iShares could serve as a potential new base layer of collateral backed by regulated cash flows and established issuers.
The CEO of BlackRock, Larry Fink, had previously described tokenization as “one of the most exciting areas of growth in financial markets” during an earnings call.
Being the world’s largest asset manager, BlackRock views the nearly $4 trillion held in digital wallets across crypto assets, stablecoins, and tokenized assets as a major growth opportunity, especially with younger investors who are already comfortable with tokenized assets but lack access to high-quality traditional investment programs.
Other analysts suggest that BlackRock’s tokenized iShares may likely operate on established blockchain networks like Ethereum, or potentially on other private/permissioned blockchains, as the infrastructure choice will be critical for ensuring scalability and security.
Is Bitwise pivoting strategy because of Bitcoin?
This tokenization strategy comes as one of the avenues for navigating a bearish crypto market. Bitcoin is currently trading near $66,000, down by approximately 4.57% over the last 24 hours, with about $47 billion in trading volume. Ethereum is trading at approximately $2,000 per token (down by nearly 5%), and Solana is trading around $78 (about a 6.5% reduction), leaving many firms with crypto exposure looking for ways to stay afloat in a very volatile period.
Hougan told investors that he expects Bitcoin to settle between $75,000 and $100,000 in the first half of 2026, before spiking to record-breaking highs in the second half of the year as falling interest rates, institutional flows, and lower volatility replace the usual four-year cycle pattern.
However, for Bitwise, which trades across Bitcoin, Ethereum, Solana, and XRP ETFs (plus its Crypto Industry Innovators equity fund), the tokenization wave delivers both opportunity and competitive pressure.
The firm has already started preparing itself for the shift by launching the Model Portfolio Solutions for Digital Assets (now available across various billion-dollar advisory firms) earlier this month. This will give financial advisors more structured frameworks to allocate crypto through ETFs.
The race to capture $4 trillion in digital wallet capital is on
The strategic importance of tokenized traditional assets goes beyond just adding blockchain settlement to existing assets. BlackRock’s strategy is targeting a critical gap: the $4 trillion sitting in digital wallets belonging to users who would like to remain in the crypto space but can’t access stocks, bonds, or diversified ETFs without converting their assets back into regular currency and using more traditional methods.
“If we could orchestrate a business plan around tokenization of ETFs, it is young people who are heavy users of tokenized assets, and then we could introduce them to more traditional assets sooner in their life path,” Fink explained during BlackRock’s earnings discussion.
For crypto platforms like Bitwise, the challenge is clear: BlackRock’s $10 trillion in assets under management plus the dominating iShares brand could quickly mop up market share in tokenized products, possibly repeating the pattern that happened with Bitcoin ETFs.
BlackRock’s iShares Bitcoin Trust (IBIT) is now the fastest-growing ETF in history, accumulating over $70 billion in assets.
According to RWA.xyz, the distributed asset value of the tokenized real-world asset market is close to $25 billion in on-chain value, with private credit organizations and US Treasury-backed products emerging as early adopters.
Other major asset managers like Fidelity, Franklin Templeton, and Goldman Sachs are also expected to accelerate their tokenization strategies.
As blockchain technology continues to mature, Hougan’s theory that tokenization will help lead crypto out of this bear market may be proven right. Nonetheless, at the moment, the race is on to sit comfortably at the intersection of traditional finance credibility and crypto distribution, with billions in assets and the future of digital finance at stake.
Source: https://www.cryptopolitan.com/bitwise-on-blackrock-etf-tokenization-wagon/
