BlackRock is experimenting with tokenized ETFs, attempting to bring 24/7 trading, broader global access, and greater crypto integration into TradFi markets.
This concept has been growing all over the community, with the SEC also exploring ways to merge Web3 capabilities with non-crypto markets. BlackRock’s experiment has some downsides, and it may be unnecessary.
Tokenized ETFs: A New Use Case?
Tokenized stocks have been a hot topic in crypto lately, with Web3 firms and TradFi institutions both trying to explore the technology. However, an interesting new use case may be developing. According to Bloomberg, BlackRock is attempting to create tokenized ETFs.
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The firm already issues the largest Bitcoin ETF in addition to a highly successful tokenized US Treasury fund. This puts the institution in an advantageous situation to combine the two concepts.
In essence, BlackRock is looking to determine whether this solution could bring more Web3 trading characteristics to TradFi.
This concept has been gaining a lot of steam in the crypto industry as of late. Cryptocurrency trades on all hours of the year, but institutional investors are bound by other rules.
The SEC is exploring policy changes that could enable 24/7 trading, but BlackRock is trying to determine if tokenized ETFs would suffice.
Is The Market Ready?
Still, this plan might face a few important difficulties. Although tokenized ETFs could theoretically bridge TradFi and Web3, the entire RWA market is underperforming expectations. Most of the trade that does take place is localized to crypto-native firms.
Eric Balchunas, a prominent ETF analyst, doesn’t see the appeal for this plan:
Plus, US regulators are prepared to employ radical solutions to better facilitate crypto markets. It might be cleaner to devise a new legal solution instead of turning to tokenized ETFs. If RWAs aren’t an attractive onramp for institutional investors, this experiment may not have staying power.
Still, it doesn’t need to. BlackRock is demonstrating the financial industry’s desire for some of these reforms, which could help make them become a reality.