BlackRock considers tokenizing ETFs as JPMorgan warns

BlackRock, the world's largest asset manager, is said to be exploring options to tokenize ETF funds on the blockchain, after their spot Bitcoin ETFs recorded strong performance.

According to sources close to the discussions, Bloomberg believes that the company is considering tokenizing funds that have exposure to real assets (RWA). However, any move will have to overcome regulatory hurdles.

ETFs have become one of the most popular investment tools — in fact, there are currently more ETFs than publicly listed stocks, according to Morningstar.

Tokenizing ETFs can allow them to trade outside of standard market hours and be used as collateral in decentralized finance applications (DeFi).

BlackRock's interest in tokenization is not new. The company currently manages the world's largest tokenized money market fund, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), with total assets of $2.2 billion spread across blockchains such as Ethereum, Avalanche, Aptos, Polygon, and other platforms.

JPMorgan stated that tokenization is an "important leap" for the $7 trillion money market fund industry, highlighting the initiative launched by Goldman Sachs and Bank of New York Mellon, in which BlackRock will participate right from the launch stage.

Under this initiative, BNY's clients will gain access to money market funds with ownership shares directly registered on Goldman Sachs' private blockchain.

Market capitalization of BUIDL by network | Source: RWA.xyz## In the face of blockchain trends, TradFi seeks to strengthen its position with money market funds.

The rise of tokenized money market funds does not occur in a vacuum but is accompanied by increasing pressure on traditional finance — particularly from the rapid adoption of stablecoins and the flow of liquidity into blockchain-based markets.

In May, it was reported that American banking associations are particularly cautious about yield-generating stablecoins due to concerns that they could disrupt traditional banking models. Notably, these tokens have been excluded from the U.S. GENIUS Act — the first law to comprehensively regulate stablecoins.

In June, JPMorgan strategist Teresa Ho stated that tokenized money market funds would continue to attract capital into the industry, while also enhancing their appeal as collateral. She emphasized that this could help preserve "cash as an asset" in the context of the growing influence of stablecoins.

"Instead of giving cash or Treasury bonds, you can provide shares of a money market fund while still earning interest. This demonstrates the flexibility of money market funds," Ho told Bloomberg.

However, analysts believe that the development of stablecoins under GENIUS will ultimately benefit tokenization by providing clearer regulations and a more favorable pathway into blockchain markets.

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