Fidelity Investments has introduced an initiative to create a tokenized share class of a money market fund on the Ethereum blockchain to enhance transaction transparency.
What is the OnChain Share Class?
The OnChain share class is an Ethereum-based blockchain share class for Fidelity’s money market fund. The initiative aims to offer greater transparency and verifiable share transaction records for investors. Although blockchain is used to record transactions, Fidelity will maintain the traditional book-entry as the official ownership record. The blockchain acts as a public ledger, providing a view of share ownership. Investors will hold shares in a blockchain wallet.
No Tokenization of Underlying Assets
While blockchain technology is used for share recording, the underlying U.S. Treasury securities in the fund will not be tokenized. The fund will continue to invest in cash and U.S. Treasury securities to ensure capital preservation and liquidity for its investors. 99.5% of the fund's assets are held in U.S. Treasury securities, with the remaining 0.5% possibly allocated to other investments.
Blockchain and Operational Efficiency
Fidelity’s blockchain initiative highlights the growing trend among asset managers and banks toward using blockchain technology to improve operational efficiency. This enables around-the-clock settlements and greater transparency, benefiting both investors and asset managers. Tokenization of shares also streamlines share transfer processes. In the future, blockchain-based funds might become more common, offering a faster, more efficient way for the financial industry to manage transactions.
Fidelity Investments, with its innovative blockchain project and tokenized securities, is joining leading market players in offering investors more transparent solutions.
