BlackRock, one of the largest investment firms globally, is considering the tokenization of its exchange-traded funds (ETFs) to enhance accessibility and opportunities for investors.
Popularity of Tokenization
Tokenization, the process of converting tangible assets into digital tokens, is becoming increasingly popular due to its ability to improve trading efficiency, lower transaction costs, and shorten settlement times. BlackRock has experience managing the tokenized money market fund BUIDL, operational across multiple blockchains.
24/7 ETF Trading
Tokenized ETFs could set a precedent for continuous trading, deviating from traditional market structures. The flexibility of this new trading model may appeal to a broader range of investors; however, significant regulatory challenges remain, including questions about governance and compliance.
Industrial Potential of Tokenization
Tokenization may lower entry barriers, inviting more diverse participants and democratizing investing previously dominated by institutional investors. Tokenized funds already boast a market cap exceeding US $7.4 billion, proving their viability.
By embracing tokenization, BlackRock is navigating both the promising and challenging aspects of modernizing its ETF offerings. While perpetual trading and reduced barriers are attractive, regulatory uncertainties persist, indicating crucial changes in investment accessibility and methodology.
