After the successful Bitcoin fund, BlackRock explores tokenization ETF.

According to Bloomberg, the world's largest asset management company, BlackRock, is exploring how to tokenize exchange-traded funds (ETF) on-chain. This discussion comes after the strong performance of the company's Spot Bitcoin ETF, which has attracted billions of dollars in inflows since its launch.

US Bitcoin ETF fund flows

BlackRock's next step into tokenization

Bloomberg reported on Thursday, citing sources, that BlackRock is weighing the risks of tokenizing its funds and exposure to real-world assets (RWA). Tokenization ETFs could bring numerous benefits, including the ability to trade outside of traditional market hours and use stocks as collateral in decentralized finance (DeFi) applications. However, any such initiative will still face regulatory hurdles before implementation. According to Morningstar, ETFs have become one of the most widely used investment tools, even surpassing the number of publicly listed stocks. BlackRock's push to bring ETFs on-chain could mark a pivotal moment in the integration of traditional finance and blockchain technology.

Continue the momentum of BUIDL

This is not BlackRock's first step into tokenization. The company already manages the world's largest tokenized money market fund—the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), which has accumulated $2.2 billion in assets on blockchains such as Ethereum, Avalanche, Aptos, and Polygon. JPMorgan calls tokenization a "major leap" for the money market fund industry, which is as large as $7 trillion. BlackRock's move complements similar initiatives from Goldman Sachs and BNY Mellon. According to a new partnership, BNY's clients will be able to invest in tokenized money market funds, with ownership directly registered on Goldman's private blockchain.

TradFi resists stablecoin competition

The rise of tokenized money market funds comes against the backdrop of the growth of stablecoins. Analysts warn that yield-bearing stablecoins may siphon liquidity away from traditional banks. Earlier this year, U.S. banking lobbyists pushed back against such tokens, notably excluding them from the U.S.'s first comprehensive stablecoin legislation, the GENIUS Act. In June, JPMorgan strategist Teresa Ho stated that tokenized funds could help maintain the position of cash in financial markets. By allowing investors to use tokenized money market shares as collateral, they can retain interest income instead of forfeiting it by collateralizing cash or U.S. Treasuries.

BlackRock's macro outlook

BlackRock is considering launching a tokenized ETF, marking the growing trend of tokenization of real-world assets as a bridge between traditional finance and the Blockchain market. With the continued acceleration of stablecoin adoption, clearer regulation under the GENIUS Act is expected to support a broader tokenization process. If BlackRock moves forward, it could not only reshape ETF trading but also redefine the interaction between these funds and the emerging DeFi ecosystem, positioning the company at the forefront of financial innovation.