Bridging DeFi and TradFi: BNY, Securitize Launch Tokenized Credit Fund

The Bank of New York Mellon (BNY) and tokenization specialist Securitize have launched the Securitize Tokenized AAA CLO Fund (STAC), a groundbreaking financial product that brings AAA-rated collateralized loan obligations (CLOs) onto the Ethereum blockchain. The fund, which leverages BNY's custodial expertise and Securitize's digital asset infrastructure, marks a pivotal step in the tokenization of traditional finance (TradFi) assets, offering institutional investors enhanced liquidity and transparency, according to Ledger Insights.

The fund is sub-advised by BNY Investments, which manages $2.1 trillion in assets, and will custody its underlying assets through BNY's digital asset capabilities. A planned $100 million anchor investment from Grove, a credit infrastructure protocol within the decentralized Sky ecosystem, is pending governance approval, Bloomberg Law reported. Grove, which oversees tokenized credit for Sky's $9 billion stablecoin USDS, aims to use the fund to bridge decentralized finance (DeFi) and TradFi, enabling faster settlement and fractional ownership of high-quality credit instruments, according to Phemex.

Collateralized loan obligations, which pool corporate loans into risk-tiered tranches, have long been a staple of institutional portfolios. AAA-rated tranches, the safest and most liquid, now gain blockchain-driven advantages through tokenization. By representing fund shares as Ethereum-based tokens, STAC addresses traditional barriers like slow settlement and limited accessibility, CoinDesk reported. Jose Minaya, global head of BNY Investments and Wealth, emphasized that tokenization "improves access to high-quality credit in an efficient and transparent instrument," in a BNY Mellon press release.

Market projections underscore the significance of this move. Boston Consulting Group and Ripple estimate the RWA tokenization market could surge from $35 billion today to $18.9 trillion by 2033, according to a Bitget report. CLOs, with global issuance exceeding $1.3 trillion as of 2024, represent a prime candidate for tokenization, offering durable, floating-rate exposure to institutional investors, as Ledger Insights noted. Securitize CEO Carlos Domingo noted the fund "marks the beginning of a new era in TradFi tokenization," combining BNY's infrastructure with blockchain's programmability, as stated in the BNY Mellon press release.

The partnership also highlights BNY's strategic pivot toward blockchain. Having previously supported tokenized money-market funds like BlackRock's BUIDL, the bank is now expanding its footprint into structured credit. Grove's $100 million allocation, if approved, would further validate the viability of tokenized credit markets, CoinDesk reported. Meanwhile, Securitize, which has tokenized $4.5 billion in assets, is pursuing a $1.25 billion SPAC merger to become the first U.S.-listed tokenization-focused firm, Bitget reported.