- ParaFi's First Step into Fund Tokenization
- Benefits of Fund Tokenization
- Growing Interest in Blockchain Technology
Digital asset management firm ParaFi Capital has taken its first step into fund tokenization by offering a minority stake in its latest venture capital fund on the Avalanche blockchain.
ParaFi's First Step into Fund Tokenization
According to a Sept. 12 Bloomberg report, the firm’s $1.2 billion fund will be partially tokenized and available for trading through the Securitize platform, marking a move toward integrating blockchain technology into traditional asset management. ParaFi founder Ben Forman said, 'We decided we want to eat our own dog food. We are investors in this technology, but we didn’t just want to invest in the tokenization infrastructure, we wanted to use it ourselves.'
Benefits of Fund Tokenization
Tokenizing a fund means converting ownership interests — or shares — into digital tokens that are stored and managed on a blockchain. Each token represents a fraction of ownership in the underlying asset, allowing these tokens to be bought, sold, or traded on digital platforms. Tokenization lowers the barriers to entry, allowing more people to participate in investment opportunities that were previously reserved for large institutional or wealthy investors.
Growing Interest in Blockchain Technology
Investment managers are increasingly exploring the intersection between funds and blockchain technology. BlackRock, for instance, launched its BlackRock USD Institutional Digital Liquidity Fund (BUIDL) on the Ethereum blockchain in 2023, tokenizing traditional financial instruments, such as US Treasurys, cash, and repurchase agreements. According to data available on Dune Analytics, over $1.6 billion in securities had already been tokenized, an increase of 11% over the past 30 days. Global bank Citi forecasts that the tokenization market will reach up to $5 trillion by 2030.
ParaFi Capital's move to tokenize its fund opens new opportunities for investment management using blockchain technology, reinforcing its market position.
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