Fidelity Tokenizes Treasury Fund on Ethereum Blockchain

Fidelity Investments, a prominent asset management firm, has taken a significant step into the realm of tokenization-based finance. The company has filed with the US Securities and Exchange Commission (SEC) to tokenize a share class of its US Treasury money market fund on the Ethereum blockchain. This move marks Fidelity's first major foray into asset tokenization, aiming to enhance transparency and traceability for investors.

The filing, submitted on March 21, details Fidelity's plan to introduce an "OnChain" share class for its Fidelity Treasury Digital Fund (FYHXX), which currently manages $80 million in assets. The underlying assets, primarily US Treasury bills and cash, will remain in traditional custody. However, investor share records will also be logged on the Ethereum blockchain, providing an additional layer of transparency. The official ownership records will still be maintained off-chain by Fidelity’s transfer agent, with daily reconciliations between the blockchain entries and the official records.

Fidelity's approach to tokenization is part of a broader trend among traditional finance giants exploring this technology. Other firms, such as BlackRock and Franklin Templeton, are also delving into tokenization to modernize financial infrastructure. Tokenization involves creating digital representations of real-world assets on a blockchain, offering benefits such as real-time settlement, fractional ownership, improved transparency, and broader access to financial products.

Fidelity's cautious yet deliberate strategy involves testing the benefits of blockchain technology without disrupting regulatory compliance or investor expectations. By keeping the core asset structure unchanged and only recording a secondary ledger on-chain, the firm can experiment with blockchain advantages while maintaining the fund's conventional money market characteristics. The OnChain share class is expected to go live by May 30, pending regulatory approval. Fidelity has also indicated that it may explore other blockchains beyond Ethereum in the future, suggesting a long-term commitment to the digital asset space.