What happened?
BlackRock, the largest asset manager in the world, is researching ways to tokenize exchange-traded funds (ETFs). According to a Bloomberg report, they are specifically considering ETFs that are connected to real-world assets like stocks. This idea is being pursued subject to regulatory considerations and follows the company’s successful endeavors in digital assets including its tokenized money-market fund BUIDL and spot Bitcoin ETF.
Who does this affect?
The move to tokenize ETFs affects BlackRock, asset managers, investors and the broader financial industry. If successful, tokenized ETFs could allow for easier international access and trading outside Wall Street’s usual hours. Companies like Franklin Templeton have already issued tokenized share classes of money-market funds. BlackRock CEO Larry Fink has previously expressed his belief that every financial asset can be tokenized.
Why does this matter?
This potential shift towards tokenization relates to market impact in several ways. New research suggests that tokenizing real-world assets could tap into the $400 trillion traditional finance market. Furthermore, reports suggest that the tokenized RWA market could reach $16 trillion by 2030. This includes both traditional banks and blockchain-native firms exploring RWA products for yield generation and liquidity management. However, there are still challenges to overcome regarding regulatory and custodial issues.