Fidelity Files for Blockchain-Based Money Market Fund, Joins Tokenization Race

Fidelity Investments has taken a significant step into the asset tokenization race by filing with the U.S. Securities and Exchange Commission (SEC) to register a blockchain-based version of its U.S. dollar money market fund. The fund, named Fidelity Treasury Digital Fund (FYHXX), is an $80 million fund primarily composed of U.S. Treasury bills, which was launched late last year. The on-chain class of the fund currently operates on the Ethereum network, with plans to expand to other blockchains in the future. If approved by the SEC, the product is expected to launch on May 30.

This move by Fidelity aligns with a broader trend where global banks and asset managers are adopting blockchain technology to tokenize traditional financial assets. This shift, known as the tokenization of real-world assets (RWAs), offers the potential for enhanced operational efficiency, reduced costs, and the ability to settle transactions around the clock. Fidelity's entry into this market comes as competition heats up, with other major players like BlackRock and Franklin Templeton already making significant strides in the tokenized U.S. Treasuries market.

BlackRock, in collaboration with digital asset firm Securitize, launched a tokenized T-bill fund termed BUIDL in March 2024, which has grown to approximately $1.5 billion in assets. Franklin Templeton’s fund, the first to debut on the on-chain money market, has accumulated $689 million in assets since its launch in 2021. The tokenized U.S. Treasury market has seen significant growth, with the market size estimated at $4.78 billion. Analysts expect Fidelity's entry to further fuel growth in the sector as more institutional players embrace asset tokenization.

Fidelity, with its strong track record in the crypto space, is well-positioned to succeed in the asset tokenization arena. The firm is one of the largest spot Bitcoin exchange-traded fund (ETF) issuers, with its FBTC ETF valued at $16.5 billion and FETH ETF at $780 million. This experience in the crypto market could provide Fidelity with a competitive edge as it ventures into the tokenized U.S. Treasuries market. The U.S. regulatory environment, which has historically been cautious about crypto, is also shifting, with pro-crypto policies and new guidelines for tokenized assets as collateral being explored. This regulatory shift, along with the growing acceptance of tokenization by major financial institutions, is expected to drive further growth in the tokenized asset market.