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Big news from Fidelity! They’ve just filed paperwork with the SEC to launch a tokenized dollar fund right on Ethereum. Mark your calendars: the potential launch date is May 30th. If regulators give it the thumbs up, this fund could be a real first – one of the earliest on-chain money market funds from a seriously big player in traditional asset management.

So, what’s the deal? Fidelity is registering a brand new “OnChain” share class for their existing Fidelity Treasury Digital Fund (FYHXX). This fund already holds good old cash and U.S. Treasury securities and launched quietly late last year. Now, they’re aiming to bring it onto the Ethereum blockchain, using it as the transfer agent. And who knows, maybe other blockchains will be next.

This move isn’t some random idea. The market for tokenized U.S. Treasuries is actually booming, currently sitting at a cool $4.77 billion. Get this: that’s nearly a 500% jump in just one year, according to data from rwa.xyz.

It seems like everyone’s racing to get traditional assets onto blockchain technology these days, and this time, it’s not just hype. The filing itself mentions that the Ethereum-based share class for the fund is waiting for approval and, fingers crossed, will go live on May 30th, assuming everything goes smoothly.

Fidelity targets tokenized Treasuries with Ethereum-based FYHXX

Fidelity, a giant managing a staggering $5.8 trillion in assets, is clearly making a play to catch up in the tokenized Treasury game. Right now, BlackRock seems to be in the lead. Their fund, BUIDL, which launched last March with Securitize, now holds a hefty $1.5 billion, according to rwa.xyz. And let’s not forget Franklin Templeton, kind of the OG in tokenized funds. Their on-chain money market product has pulled in $689 million since launching way back in 2021.

The whole concept is pretty straightforward: take traditional financial stuff like bonds, credit, and funds, and put them on a blockchain. Why bother? Think faster settlements, around-the-clock trading, and cutting out those pesky middlemen. That’s the sales pitch, anyway. FYHXX is now jumping into this arena, using Ethereum as its foundation. Blockchain becomes the new transfer agent. We’re talking about Real-World Assets (RWAs) getting tokenized, and Fidelity definitely wants a piece of the action.

Tokenization itself isn’t a new concept. But for years, it felt like it was stuck in slow motion. Aside from stablecoins, which acted like digital dollar placeholders, most tokenized assets just didn’t take off. Believe it or not, only about 67,530 wallets, mostly belonging to big institutions, actually hold tokenized assets that aren’t stablecoins. That’s just a tiny 0.003% of the world’s total asset value. Research firm Opimas says it’s been so slow that many companies working on these projects are considering calling it quits.

“Now they felt like they are able to do something and sped up their timeline a lot, whereas previously they were just watching,” explains Charlie You, co-founder of rwa.xyz. So, basically, firms are now rushing to get in on this.

Tokenization market heats up as institutions return

The confusing U.S. regulatory landscape didn’t help things. For years, regulators were practically telling banks to steer clear of anything crypto. Even though tokenized securities follow the same rules as traditional ones, they got lumped in with the crypto world and seen as super risky. The result? Big firms backed away, and many shifted their focus to AI instead. But now, with Donald Trump back in the picture and pushing a more crypto-friendly stance, the atmosphere has changed dramatically, and fast.

When BlackRock’s BUIDL fund hit the market, it felt like a turning point for the whole industry. It gave everyone the confidence to try again. Fidelity clearly saw this as a green light and sped up their own plans. And it’s not just them. Back in October, Visa rolled out a platform specifically for banks to issue tokens backed by fiat currency.

Then in November, Tether launched its own tokenization platform. That same month, Mastercard connected its token network with JPMorgan Chase to handle B2B payments on the Kinexys blockchain. JPMorgan says Kinexys is already processing around $2 billion in transactions daily.

Raj Dhamodharan, EVP of blockchain and digital assets at Mastercard, commented, “That’s a clear trend that will continue to evolve and unlock a lot of new business models. That trend is here to stay.”

And get this, the Boston Consulting Group predicts that tokenized fund assets could skyrocket to $600 billion by 2030. Considering it’s around $2 billion today, that’s a massive leap! Even the Commodity Futures Trading Commission (CFTC) is taking note and looking into new guidelines, exploring how tokenized assets could be used as collateral in future trades.

Proponents argue that tokenization brings some serious perks: more liquidity, faster trades, and lower costs. Rob Krugman, Chief Digital Officer at Broadridge, mentioned his firm has already tokenized trillions of dollars in repos. “By tokenizing those assets, it enables natural efficiency,” he explained. “It may even be bigger than the internet. It’s fundamentally rethinking the way the markets work.”

Industry still worries about bad assets and dumb risks

But, not everyone is sold on all of this. There’s definitely criticism out there. Some in the industry worry that tokenization is getting a bit carried away. Nathan Allman, CEO of Ondo Finance, put it this way:

“You sort of end up with a lot of poorly priced assets being sold to not so sophisticated investors.” He also added, “Outside of Treasuries, I think there’s almost no value in tokenized public securities. Really, no one has done public securities well. The majority of projects in this space are unfortunately trying to distribute low quality, poorly priced assets.”

Even some insiders are skeptical. Carlos Domingo, CEO of Securitize, doesn’t see the point in tokenizing real estate. Noelle Acheson, writer of Crypto is Macro Now, isn’t buying into the hype around private equity tokenization either. She thinks it “feels a little more to me as a solution looking for a problem.” Her point? Private equity isn’t really designed to be traded freely. Same deal with tokenizing a Picasso – you own it on paper, but you can’t exactly hang it on your wall. So, what’s the real benefit?

There are definitely some upsides, though. Automation can reduce risks when dealing with different parties. For instance, you can put assets in escrow that automatically unlock when goods are delivered. That’s a key point Charlie You brought up. There’s also potential to upgrade our old-fashioned payment systems. Analysts at Capco say current systems are outdated. Adding programmable money could make things better, but it’s going to take time to get there.

“There are a lot of opportunities, we don’t disagree with that, but there is still a lot of work to be done,” said Ervinas Janavicius, managing principal at Capco.

Meanwhile, Fidelity is already deeply involved in the crypto world. Their spot Bitcoin ETF (FBTC) holds a massive $16.5 billion, and their ether ETF (FETH) has around $780 million, according to SoSoValue.

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Source: cryptopolitan.com