Asset managers are accelerating plans to tokenize exchange-traded funds (ETFs) amid fears of missing an early foothold in blockchain-based finance, according to BNY's global head of ETFs, Ben Slavin. Firms like BlackRock and Franklin Templeton are exploring placing traditional fund products on blockchain rails, enabling shares to trade as digital tokens. While many tokenized products currently focus on money market funds, interest extends to broader assets. This push continues despite unresolved questions around regulation, trading infrastructure, and market structure. Slavin noted that clients exhibit 'FOMO,' wanting to enter early even though the ecosystem is not fully ready. A growing concern is that third parties are already creating tokenized versions of well-known ETFs trading in unregulated markets, posing reputational risks to issuers without their involvement. BNY has multiple projects in flight to tokenize ETFs, reflecting the industry's shift from experiment to commercial product. Wall Street sees blockchain as a potential new distribution channel for traditional investments, offering 24/7 trading and reduced settlement times.

Key facts

• Asset managers rush to tokenize ETFs due to fear of missing blockchain finance opportunities.
• BNY reports multiple projects to tokenize ETFs despite unresolved regulatory and infrastructure issues.
• Third parties tokenize well-known ETFs in unregulated markets, creating reputational risk for issuers.
• Tokenization interest extends beyond money market funds to broader asset classes.
• Wall Street sees blockchain as potential 24/7 distribution channel with faster settlement.

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